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Summary: SoFi Technologies had the third-highest Vol/OI ratio in Thursday’s options trading. It was one of 20 unusually active options for the fintech growth stock. If you bought SOFI stock at the 2022 lows, it could be time to get protective.
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A couple of interesting economic data points were released this morning.
The U.S. S&P Global Manufacturing PMI reading for November was 48.8, a four-month high. That compares to last month’s value of 48.5, but lower than the 48.9 expected. In addition, the University of Michigan’s U.S. Consumer Sentiment Index figure for November was 71.8, up from 70.5 in October but lower than the 73.5 estimate.
The results have stocks mixed halfway through Friday’s trading.
In yesterday’s unusual options activity, there were 1,313 calls and puts with V0l/OI ratios of 1.24 or higher (expiration dates of seven days or longer). Of those, 20 were for SoFi Technologies (SOFI), the fintech growth stock whose share price had been in the wilderness for more than two years until taking off in September. SOFI stock is up 126% in the three months since.
Of the 20, SoFi’s July 18/2025 $21 call stands out with a Vol/OI ratio of 66.54, the third-highest in Thursday’s trading.
If you’re a long-term shareholder of SoFi, the sudden move higher is unexpected money in the bank. This unusually active call option is part of the protective measures you can take to lock in hard-earned gains. Here’s why.
Have an excellent weekend!
SoFi’s Business Is Humming
The Motley Fool recently described the fintech disruptor’s business as “firing on all cylinders, adding more and more products to improve its value. In turn, this is leading to more customer growth.”
I’ve liked SoFi’s business for a while now. In January, I discussed how to play its stock using options after it delivered its first GAAP profit.
“I’ve always been bullish about the company and its CEO, Anthony Noto, who left Twitter (smart move) in January 2018 to take the top job,” I wrote on Jan. 30.
“While there’s no question its stock remains a play for risk-tolerant investors only, I think the long-term story is getting better by the day. A GAAP profit helps shift the narrative from analysts.”
Eleven months later, analysts remain on the sidelines. Of the 17 covering SOFI stock, only four rate it a Buy (3.06 out of 5) with a target price of $9.93, well below where it’s currently trading.
The company reported its Q3 2024 results at the end of October. The key highlight is that it earned $60.7 million, its fourth consecutive quarter of GAAP profitability. Further, its adjusted net revenue increased by 30% to $689.4 million. Lastly, it added 756,000 new members in the quarter, bringing the total to 9.37 million, 35% higher than a year ago.
The financial services segment stands out as a real positive for the company.
While its lending segment continues to be the most significant source of profits (64%), financial services are coming on.
On Nov. 12, SoFi announced that it would partner with BlackRock to launch a robo-advisor platform for SoFi members.
“Our new robo platform bolsters our commitment to empowering the everyday investor,” Anthony Noto, CEO of SoFi, said in its press release announcing the partnership. “We launched one of the broadest offerings of alternative assets available from an online brokerage.”
There is no doubt that SoFi is building a business that will be around a decade from now.
Why Not Let SOFI Ride?
I’m not suggesting that SOFI stock won’t be higher a decade from now. It likely will be considerably above where it currently trades. I still like it as a long-term hold.
However, with the S&P 500 yield at 1.2%, the lowest it’s been since the 2008-2009 financial crisis, stocks are priced for perfection. Any economic slip due to Trump tariffs or another opposing force and stocks will take it on the chin.
It may not be a 31% single-month decline like in March 2020, but a 24% drop, such as the one between December 2021 and October 2022, is more than possible.
Options strategies for protecting SOFI profits are one way to ride out a future storm.
The July 18/2025 $21 call from yesterday’s unusual options activity provides a starting point for protecting long-time shareholders' gains over the past three months by implementing a protective collar.
“A collar position is a hedge strategy created when owning underlying shares and simultaneously selling a call (covered) and buying a put (protective). Call options are typically sold above the price, and put options are typically bought below the price,” states the Barchart Protection Strategies page for SOFI stock.
Focusing on July 18/2025 calls, you have three puts available.
For this example, let’s assume you bought SOFI stock at $4.90 in May 2023. Based on yesterday’s $15.01 closing price, you’re sitting on a paper profit of $10.11 a share or $1,011 on 100 shares. That’s an annualized return of nearly 111%. Not too shabby.
So, with all three covered calls, you’ll receive a $1.65 premium income, while the puts will cost you anywhere from $1.52 to $3.10. In the case of the $12 put, you’ll be in a $0.13 net credit position compared to net debits of $0.91 ($14) and $1.45 ($16).
In all cases, you’ve locked in an upside of 39.91% from its current price. If the shares are $25 at expiration in 239 days, you’ll have to sell your $100 shares at $21, forfeiting $4 a share profit.
Why Not Just Buy a Put?
Let’s assume that’s what you do. The $15 put had an ask price of $3.10. The ITM (in the money) probability is just less than 50%. In this case, in the money, the share price is below $15 at expiration.
For example, say SOFI drops to $10 by next July and the put’s expiry. In that case, you would make $1.90 on the put ($15 strike less $10 share price and $3.10 ask). However, your 100 shares would be down $5.01 a share, so your net loss would be $3.11.
In the case of the July 18/2025 $10 put, where the share price falls to $10 at expiration, your loss would be $0.85, the cost of the put. Add $5.01 a share in paper losses for a net loss of $5.86.
As I always like to say, I’m a newbie about options despite writing about them for over two years. The purists would probably say that any of these strategies should have shorter DTEs. Maybe.
With my protective collar strategy, if the shares go to $25 by next July, and you’re forced to sell your 100 shares at $21, you will have a realized gain of 329% and an annual return of 95.6%. Without any protection, you’d have an unrealized gain of 410% or an annual return of 111.9%.
If. If. If.
Based on the July 18/2025 $12 put, if the shares go to $10, you will have lost $5.01 on the share depreciation but gained $2.13 from the premium income on the covered call and $0.48 from the sale of the shares ($12 strike less $10 share price and $1.53 ask).
That’s a net loss of $2.88, better than $3.11 from the $15 put and $5.01 from the $10 put.
Oh, my head hurts.
