Bullish Option Traders Getting Hammered As Roblox Falls From Session Highs

What Happened: Roblox Corporation RBLX, which is up over 50% in the last two weeks, has been selling off aggressively from today's session highs.

The stock has seen a huge increase in options activity lately with over 246,000 options traded Wednesday.

SEE ALSO: Roblox Stock Has Another Strong Day On Heavy Option Flows 

It was noted in this article from Nov. 17 there are a lot of options rolling off this Friday and that "...the later it gets in the week, the harder it will be to make new gains in the stock."

This appears to be playing out today, and it's certainly not due to lack of interest as traders have printed over 438,000 options on the stock today (image below).

Looking at the data above, options traders have traded about 298,000 calls and 140,000 puts, which translates to 68 out of every 100 options being calls today.

Why It Matters: The heavy options volumes today clearly communicate there is a lot of activity from traders with many of them aggressively buying the stock. It's likely a decent amount of these "flows" are prior open trades being closed or monetized (i.e. long calls being closed for profit).

Regardless, the heavy time decay (theta) of those long calls is likely being expressed today via their closing, which is likely a contributing factor behind the 10%+ decline shortly after the open.

What's Next: Looking beyond the short-dated expiry Friday, the next largest expiry by volume is the following week (Nov. 26). This means options traders have simply carried their view forward by a week.

Considering the volume for the Nov. 26 expiry is four times larger for calls than puts, it suggests option traders are maintaining a bullish view for next week.

Looking at the top strikes by volume, there are strong flows around the $120, $125 and $130 strikes with interest dropping off materially after that (image below).

This positioning suggests option traders see strong support around $120, and are looking to target $130 and $140 for the following week.

Should prices break below $120 next week, the next level of option flows comes in at the $110 strike.