SanDisk crashed another 7%, someone reversed and dumped 7.3 million to bottom-fish a margin call.

Last Wednesday, I was still watching a deep out-of-the-money LEAPS position on SanDisk expiring in 2027. Yesterday's article said to wait for the after-hours low of 1689 to be broken intraday before confirming the short position — but last night, SanDisk's stock price opened directly at 1619, plunged to 1485 during the session, and closed at 1617. From the high of 2273 at the end of June, it has shrunk by nearly 30% in six trading days. SanDisk and Micron have officially entered a technical bear market. The catalysts are still those few major events: Samsung's earnings forecast miss, the market starting to debate "whether the memory cycle has peaked," and SK Hynix's upcoming U.S. listing diverting funds.

Interestingly, on the same day, options flow reversed direction. The near-month Puts that were shorted last week haven't gone far yet. Someone sold off $7.32 million in two tranches to buy July 17th expiry, 1560 strike at-the-money Calls, with 512 contracts placed almost at the money. At the same time, a deep out-of-the-money Put with a 700 strike expiring in August was placed below as tail insurance. This is someone bottom-fishing against the trend in a technical bear market, betting that SanDisk can rebound from 1617 and stabilize above 1560 within 10 days. That deep out-of-the-money Put is just extreme downside insurance for this over $7 million position. At the moment of the trade, the underlying was around 1550, so the 1560 strike was still considered at-the-money, 0.7% away from being in-the-money. Later, the underlying recovered all the way from the intraday low to 1617, and this Call has already moved into the money.

Structurally, the premium for this main Call position averages about $143 per share, with the maximum loss being that $143 — if the underlying doesn't rise but falls, the most you can lose is that amount. Although the closing price of 1617 is already above the 1560 strike price, and the option itself is now in-the-money, to actually make money at expiration, you need to look at the break-even point: 1560 + 143 ≈ 1703. That means the underlying still needs to rise from 1617 to 1703 and hold there for this bottom-fishing trade to truly break even.

Looking back, those who were bullish in the short term last week are currently being proven wrong by reality. In the short term, one shouldn't immediately turn bullish and catch a falling knife just because of a $7.3 million Call. DTE is only 10 days. The at-the-money Call is betting on an immediate V-shaped rebound, but now the pre-market price has fallen to 1518 again, so the bottom-fishing position is currently underwater. If you really want to follow this direction, you can look at the 1638 level, which was the high of the bearish candle on July 7th, and wait for it to recover a portion of the sharp decline before considering. If it breaks below the 1485 low, it means the selling momentum is still there, and the bottom-fishing logic is likely to fail.