Market Insights

C3.ai rallied in late 2024 on a mix of bullish news, but some options traders may think the AI software company is done going up.

Check out this large transaction that appeared about 55 minutes after the opening bell on Wednesday:

• 19,152 January 36 calls were sold for $0.60.
• 19,152 January 39.50 calls were bought for $0.16.
• Volume was far above open interest in both strikes, which suggests new positions were initiated.

At the same time, these similar blocks crossed the tape:

• 19,152 10-January 37.50 calls traded for $0.04.
• 19,152 10-January 41 calls were sold for $0.01.
• Volume was below open interest in both strikes. That could mean existing positions were closed.

C3.ai (AI) daily chart, showing key events and price levels.

Such a combination of activity may suggest that an investor entered the session with a call credit spread, which can profit from a security remaining under a certain price. He or she apparently made money on the trade and rolled the position one week into the future.

Call Credit Spread

The old spread would have expired tomorrow and looked for AI to stay below $37.50. The trader closed it at a cost of $0.03.

They collected $0.44 on the new spread, which expires next Friday, January 17. It looks for the share price to remain below $36.

The transaction resulted in a net credit of $0.41.

Calls fix the level where a security can be purchased. They can appreciate when stocks rally or expire worthless if prices fail to move. In this case, the trader seemingly sold calls on the belief AI won’t rise sharply. This article has more information on credit spreads.

AI dropped 7 percent to $33.30 yesterday. It was under $27 in mid-November before jumping on news Microsoft (MSFT) will include its software on the giant Azure cloud service. AI briefly crossed above $45 on December 10 and has faded since.

The recent peak was below its earlier high in June 2023. That could make chart watchers think longer-term resistance is in place.

Rolling the call spread accounted for almost half the total options volume in AI yesterday. Calls outnumbered puts by 6-to-1, according to TradeStation Data.

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