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Someone Just Bought the Trap on Both Sides of the AI Rotation
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ticker lesson
Breakdown
0:04SNDK· ticker
SanDisk — rotation trade, puts bought on weakness
- Rotation trades playing out between semis and software
- Puts bought on both sides of the rotation
- Market pointing to both sides vulnerable
- SanDisk down 35% from high, up 648% YTD
- 1400 put at September 18th, 4 days to go
1:46CRWD· ticker
CrowdStrike — put bought on strength
- CrowdStrike up 60% this year, 50% gain today
- 210 puts at November 20th, 67 days to go
- 99% of trade crossed against 138 contracts
- Break even at $198.49
- Valuation at 147x forward earnings
3:23DRAM ETF· ticker
DRAM ETF — technical bear market
- DRAM ETF down significantly
- Substantial outflows over recent weeks
- SanDisk down 35% from high
- Still up 648% YTD
- Short-term direction may be down
5:06lesson
Short-dated puts vs long-dated options
- Short-dated puts focus on near-term momentum
- Long-dated options consider valuation and sector evolution
- 4-day put vs 67-day put
- Valuation concerns ignored until market re-evaluates
- Interest rates can bite on long-dated trades
6:52lesson
Market rotation and valuation dynamics
- Rotation between memory and cybersecurity
- Valuation concerns persist despite momentum
- CrowdStrike at 147x forward earnings
- SanDisk at 22x earnings
- Fundamental believers can stretch valuations
6:53lesson
Ex-post facto valuation re-evaluation
- Valuation concerns ignored until market re-evaluates
- Interest rates can bite on overvalued names
- CrowdStrike's valuation may re-evaluate in 67 days
- SanDisk's short-term weakness may be tested
- Market may re-evaluate valuations after rate hikes
6:54lesson
Signal vs. noise in market trades
- Two trades hit tape at same time
- Signal vs. noise debate
- Volatility in semiconductors vs software
- Different time scales for trades
- Market may re-evaluate valuations
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