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Based on the collective wisdom of engineers and futurists, electric vehicles will eventually represent the standard for personal mobility and transportation. And to go a step further, autonomous EVs will propel this forward-looking paradigm. Of course, such a notion bodes very well for Mobileye (MBLY), an autonomous driving specialist that Intel (INTC) acquired, only to spin it off in an initial public offering last year.
However, some cracks are starting to appear in the vaunted armor of the autonomy industry. Fundamentally, experts pitched autonomous driving technology as a means to promote better safety on our roadways. While humans are incredibly adept to adapting to new situations, they’re also obviously prone to error. Plus, they get tired, cranky or in the worst cases come under the influence, which may lead to devastating results.
Therefore, removing the human element – and thus eliminating the vulnerabilities that come with human operation – should theoretically improve safety. However, as the San Francisco Chronicle points out, that concept has increasingly come under fire. Specifically, the news agency features a map that shows every crash involving driverless cars in the San Francisco area.
And it’s not just cherry-picked data. Many other experts – including researchers from San Diego State University – emphasize that autonomous vehicles are far from perfect. They may be on the road to one day achieving that perfection. However, SDSU’s scientists and engineers are not ready to fully trust driving robots with their lives yet.
With that, it’s not particularly surprising that MBLY stock remains a promising but also contentious investment. It then begs the question, what do the market experts think?
MBLY Stock Presents a Nuanced Argument
At first glance, circumstances don’t seem particularly promising for MBLY stock. On Oct. 13 (Friday the 13th for the superstitious), MBLY stock represented one of the top highlights in Barchart’s screener for unusual stock options volume. Specifically, total volume reached 23,519 contracts against open interest of 53,729. The delta between the Friday session volume and the trailing one-month average metric came out to 557.14%.
In other words, the smart money demonstrated statistically significant interest toward MBLY stock. However, on a transactional basis, call volume mustered only 3,984 contracts while put volume clocked in at 19,535 contracts. This pairing yielded a very unsightly (if you’re a long-side trader) put/call volume ratio of 4.90.
From a face-value reading, it appears that more traders are acquiring puts – which gives holders the right but not the obligation to sell the underlying security at the listed strike price – rather than calls. On paper, that seems bearish. However, retail investors must also remember that if major traders are writing (selling) the options, they’re basically taking the opposite side of the bet.
And that might be what’s going on here. Looking at Fintel’s screener for options flow – which exclusively targets big block trades likely made by institutions – we see that on Friday, the bulk of the put options (both bought and sold) stemmed from major trading entities.
However, regarding the Friday puts, the sentiment appears to slightly lean bullishly. Notably, the biggest single transaction involved 5,000 sold contracts of the Nov 17 ’23 30.00 Put. Coming in second place was 2,766 bought contracts of the Oct 20 ’23 30 Put. That’s intriguing because MBLY stock lost nearly 13% of equity value last week, sending its price to $34.56 at the close.
Will shares continue to drop lower? It’s possible given the rising questions about driverless technologies. However, a technical support line sits at the $35 level. MBLY stock previously tested this point, only for it to hold. Therefore, the put writers seem confident that MBLY won’t drop significantly from here, which may be bullish.
Longer-Term Questions Remain
Despite the potential optimistic framework, the bulls shouldn’t yet rejoice. Basically, the smart money appears to be signaling a limited view of the maximum upside potential of MBLY stock.
Per Fintel, for options contracts expiring through May 19 of this year, the highest strike price stood at $55. Extend the timeline to the Aug. 18 expiry and the max strike increased to $60. That shows steady progress for MBLY’s sentiment. However, for options expiring through Dec. 15, the max strike falls to $55.
And it gets “worse” from there. Options expiring through Feb. 16, 2024 feature a max strike of $35. Through May 17, the max strike sits at $25. To be fair, once more traders participate in the opportunity, the strike price range should fill out. Still, that the absolute max strike peaked at $60 (at time of writing among institutional investors) is telling.
Of course, you can still speculate to the upside and hope that MBLY stock benefits from broader interest in autonomous driving. But for the longer-term framework, the bears might actually have the slight edge.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
