SoFi Beats On Earnings, Holds Onto Gains: Can It Break Yearly Highs? Option Analysis

What Happened: SoFi Technologies Inc SOFI posted earnings on Wednesday beating EPS estimates with a 5-cent loss versus a 14-cent estimate, along with a beat on revenue of $277 million versus the $251 million estimate. As a result, the stock rocketed $3 higher towards $24 and has been consolidating at these levels since, suggesting short-term buying interest.

It should be noted the volume today is well above the 10-day average with over 48 million shares traded versus the 29 million average. Anytime you have the volume of shares well above its 10-day average, this means there is a lot of participation and eyes on this stock from both the retail and institutional crowd.

But what's most impressive is in the option flows as there have been over 408,000 options traded on the day with 324,000 of them being calls and 84,000 of them puts (image below).

That translates to eight out of every 10 options being calls, hence there are lots of bullish options bets on this stock.

Why It Matters: The large amount of options traded today is impressive considering that prior to today, there were 870,000 calls and 429,000 puts for a total of 1,299,000 total options out there. Hence, Thursday's 408,000 options traded have added 31% to the options universe in one day, showing how aggressive option traders are trading the stock.

Now of the 408,000 options for this Thursday, about 125,000 of them are short-dated (expiring this Friday). Before today, about 36% of the options were expiring this Friday. Hence of the 1,700,000 options, approximately 592,000 are expiring this Friday.

Anytime you have 30% of the options expiring in a few days, that can create resistance in the stock as those bullish option trades will be expiring shortly, thus taking the bullish option support out of the market.

What's Next: SoFi has weekly resistance not far ahead around $25.10 (June 2021 highs) and the all-time highs just above at $28.28 (Feb 2021 highs). Between now and this Friday's expiry, the stock may have trouble breaking those resistance levels due to the large number of bullish options coming off the board. This may result in a decent pullback over the next few trading sessions.

Looking at the four-hour chart below, there is a potential support zone between $20.42 and $19.32 which has solid open interest on the options side.

Bullish traders may want to consider waiting for a pullback to get long. If the stock loses the $19.32 level, the stock may be in for a deeper unwind.