Options Trading Ramps Up as TD Ameritrade Stock Slumps

AMTD stock is down 29% already in October

It's been a bruising week for TD Ameritrade Holding Corp. (NASDAQ:AMTD) stock after Charles Schwab (SCHW) said it is eliminating U.S. stock, exchange-traded funds (ETF), and options commissions. That sent the shares tumbling nearly 26% on Tuesday, while AMTD fell another 3.3% on Wednesday, after the broker said it would drop online trading commissions to zero.

Adding fuel to the bearish flames is an onslaught of negative analyst notes, with Wells Fargo this morning downgrading TD Ameritrade to "underperform" from "outperform," and slashing its price target to $30 from $58. KBW also cut its AMTD price target overnight, to $39.50 from $53. In reaction, the shares are down 1.5% at $33.03, earlier hitting a three-year low of $32.75.

Against this backdrop, options traders have been blasting AMTD stock, with single-session volume topping out at a 52-week peak of 100,821 contracts on Tuesday. Yesterday, meanwhile, around 47,000 options changed hands, six times what's typically seen. And today, around 15,000 calls and 5,000 puts are on the tape, four times the amount that's typically seen at this point.

Looking at Tuesday's frantic session, the November 40 call was in high demand, and is now home to peak open interest on TD Ameritrade of more than 5,900 contracts. Data from the major exchanges confirms the bulk of these positions were bought during the equity's bear gap, meaning bulls are targeting a longer-term bounce for the financial shares.

On Wednesday, the weekly 10/25 38-strike call was most active, and data from the major options exchanges confirms buy-to-open activity here. Today, the weekly 10/4 33.50-strike call is popular, but it looks like traders may be selling to open the short-term options. If this is the case, the call writers expect AMTD to churn below $33.50 through tomorrow's close.