SK Hynix $33M Call Trade — Full Breakdown & Transcript

[00:02] and call buyers are stepping in. Welcome back to Signal vs. Noise where we take a tape and ask what the market is saying beneath the move. Today's name is once beneath the move. Today's name is once again SK Hynix, ticker SKHY, and I think

[00:16] the message here is pretty straightforward. The memory chip throughout 2026 is going to continue into 2027, a problem this fall. So, let's start with the flow here and why traders or a

[00:31] continuation of one of the biggest bottlenecks in the AI infrastructure trade right now. On Tuesday, August 4th, roughly 33 million in SKHY calls hit the tape. The position was heavily concentrated in

[00:43] November 20th expiration here. The November 20th 180 calls took in about 14.2 million. The November 20th 155 calls took in about 9.6 million. And the November 20th 200 calls took in about 6.69 million. There was a much smaller

[00:57] 6.69 million. There was a much smaller October 16th trade 72 days to expiration last strike on the board on the platform here for 1.86 million. So, this is absolutely a wall of upside call premium here. But, I think that the cleanest

[01:11] signal here is probably the 155 strike. It's basically at the money right now, 107 days to expiration, 9.6 million in premium, and the prior open interest was only eight contracts prior to this trade being put on.

[01:24] Just eight. So, we know this is not a repositioning, a reroll, a shuffle, a a crowded roll, if you will, into a new expiration. It's a fresh long data in what's become the largest AI memory supplier in the world. So, the buyer

[01:38] paid 109% implied volatility for this position. This is not a cheap trade whatsoever. The structure here obviously determines how long or what the profitable looks like, of course. The November window here, 107 days to

[01:52] expiration, obviously affords this trader a bit of time for this shortage leverage has been in the system because of situational awareness or these Korean traders, that's all gone. We can now go back to a more constructive form of

[02:06] trading. And so we've seen this narrative, it's showing up. It's showing it's showing up in guidance for other companies that are reporting. We've we're perhaps going to hear it from the Western Digitals and the Sandisks of the

[02:19] earnings releases due out on Wednesday, August 5th. But you have a little bit of because it's not just the 155s, the at-the-money. You also have the $180 calls. These are 17% out of the money right now. Same November expiration,

[02:34] right now. Same November expiration, 14.2 million in premium, the 108% implied volatility, and 1,008 contracts of prior open interest. So definitely less clean, but still the largest single premium print across the board. The 200

[02:47] calls are higher conviction upside expression here. They're 30% out of the money right now. 20th of November expiration, 6.69 in premium, about 108% IV when the trade is put on, and 68 contracts of open interest previously

[03:00] here. We now see today with the update, it's over 2,500 contracts. We have the lotto ticket, we'll call it. Uh, 72 days out, 104% out of the money, 113% implied volatility. Definitely interesting, but it's the noise amongst

[03:15] this quadrant of four trades. So the real read here, the signal is this November stack, this wall of call premium right now. So you have at-the-money 17% out end 30% out of the money here. All with the same

[03:28] million in premium spent. So this is a structured bet that the memory shortage is going to persist through the next few months into Q4, and given what these suppliers themselves are saying,

[03:41] probably through 2027 as well. Let's just zoom out here a little bit though because SK Hynix is a new listing. It's actually a unique listing. United States. I guess you can technically count

[03:54] Alibaba, but after some of their green shoe efforts to get more supply into the market. Either way, it's just SpaceX and SK Hynix with IPOs north of 25 billion here. We see here that they priced 177.9 million ADS at 149 on July 9th, raising

[04:09] about 26.5 billion dollars. So, we have the largest ever US share sale by a foreign company on record. Uh demand nearly reached 200 billion dollars across more than 500 institutional accounts when this stock hit the tape.

[04:24] It opened up at 170. It ultimately closed one day at 168. It now trades around 154, 155. So, only puts it about 3.6% off to the initial offer price and 3.6% off to the initial offer price and roughly 13% below the first day high.

[04:38] So, we'll move beyond the original IPO momentum window. This is no longer IPO that window here. That phase has absolutely failed right now. The AI complex rolled over after the listing. In fact, it marked the local high for

[04:51] effectively the last few sessions where stocks have rebounded here. But, Korean shares dropped over 15% over the next 4 days. And one cornerstone investor, as Situational Awareness was liquidated by Citadel a few weeks later. So, you have

[05:05] call buyers here who are not buying into a tape chasing strength right now. bit of weakness and they're looking for a counter-trend move. And I think that's reasonable here. This memory supply shortage situation to me feels like it's

[05:18] being misunderstood by still large segments of the market. The fundamental story here is evolving and very much remains in place. Apple has now paid quarters and expects more pressure into September. There's a report circulating

[05:32] recorded that they went to CXMT, the new Chinese memory supplier, looking to get basically told to go take a hike. They're being charged the same prices that SK Hynix and Samsung, uh Micron they're all putting out there right now.

[05:46] is because Huawei and other Chinese domestic manufacturers have swept up all of these new chips. Apple CFO said memory alone accounted for more than the entire cyclical drop in gross margin right now. Amazon itself is flagged

[05:58] inflated memory prices as a core driver of CapEx and Intel CEO has warned that relief may not be coming until 2028. I mean, listen to the people in the room. The memory shortage is going to continue for the foreseeable future here. And SK

[06:11] Hynix itself, it controls about 57% of the high bandwidth memory sector with revenue up 198% and margins above 70% over the past year. It's own outlook over the past year. It's own outlook calls 2027 the worst year on record for

[06:24] the chip shortage. So, that's absolutely the backdrop right now. telling you what they're seeing, you got to believe them. And this call buyer them. They're finding signal with all

[06:36] earning season here. So, that is the backdrop. This SK Hynix trade is not the short term. This is about duration, duration, and a restructuring or a re-understanding of how the market is pricing a memory chip shortage here. The

[06:50] to 109%, but we're now seeing that the shortage is showing up in financial statements, not just forecasts from other companies here. It's in Apple's margins, it's in Amazon's CapEx, it's in Intel. We hear

[07:02] we're going to talk how it's in Tesla's cost structure as we see traders trying to step into that market right now after SpaceX's earnings. So, that's the signal Hynix marked the top of the broader market with its IPO listing. It's the

[07:15] fact that you have someone willing to put on trades in size, out in time, not looking for an immediate bounce, but for this whole pullback we've seen from the over leverage. If it was situational awareness, if it was retail investors in

[07:28] Korea buying those 3x time levered ETFs and now getting wiped out, if that is yourself a little bit of time for this rebound is the right thing to do. So, a long durational bet on a structural memory squeeze here is visible or

[07:43] supply chain is absolutely what this trader is thinking and quite frankly I'm think though? Let us know in the comments below. This has been another episode of Signal vs. Noise. Of course you've been watching tasty live. Like

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