$SHOP Options Intelligence

### Current Market Context and Shopify Analysis

As of October 7, 2025, the market is experiencing a mixed environment. The S&P 500 has set fresh highs but closed lower on those days, indicating "selling into strength," while the NASDAQ 100 has been under pressure, suggesting a rotation into value stocks[5]. For Shopify (SHOP), the stock has faced technical and fundamental challenges, including a decline of about 1.23% on October 7, driven by technical breakdown signals and concerns over valuation and profit margins[1].

### Trade Recommendation

Given the current market conditions and Shopify's technical and fundamental landscape, a bearish strategy might be appropriate. The stock's price is around $164.50, and it faces resistance levels that could limit upside potential.

Trade:

🎯 BUY SHOP NOV 21 170/165 PUT SPREAD

### Rationale

1. Technical Analysis: Shopify's RSI is neutral at 68.83, but the stock is facing resistance and has shown bearish divergence signals, suggesting potential weakness[1].

2. Fundamental Analysis: The company's profit margin contraction and high valuation metrics indicate limited upside potential[1].

3. Term Structure Analysis: The Clean IV for the November 21 expiration (around 55.3%) is relatively fair compared to the baseline volatility of 55.2%, making it a neutral environment for buying or selling options. However, the IV is slightly underpriced compared to historical norms for longer expirations, which supports buying premium in this context.

4. Volatility and Event Risk: The next earnings report is on November 11, 2025, and the recommended expiration is after this date, ensuring the trade captures potential earnings-driven volatility.

5. Strategy Selection: A bear put spread is chosen to profit from potential downside while limiting risk. The 170/165 strikes are selected based on the stock's current price and expected volatility.

### Trade Metrics

• Stock Price: $164.50
• Entry: Assume a debit of approximately $2.50 (mid of $2.30/$2.70) for the spread.
• Risk: $250 per spread
• Reward: $350 if SHOP closes below $165 at expiration (40% return)
• Breakeven: $167.50
• Max Loss: $250 if SHOP closes above $170 at expiry
• Max Profit: $350 if SHOP closes below $165 at expiry
• Win Rate: 45% (based on delta)
• Days to Expiration: 45

### Term Structure & Volatility Analysis

• Baseline 90-day Vol: 55.2%
• Clean IV for Nov 21: 55.3% (neutral relative to baseline)
• Earnings Multiplier: 2.27x (moderate-high expected move)
• Calendar Opportunity: Not significant for this trade.

### Greeks & Volatility

• Net Delta: -0.23 (bearish)
• Theta: -$1.50/day (time decay)
• Vega: -$4.50 (benefits from IV increase)
• Current IV: 61.0% for the November 21 expiration (slightly elevated)
• IV Rank: 15% (low - favors buying premium)
• Put/Call Ratio: 0.08 (very bullish, but this trade is bearish)

### Why This Trade

The term structure analysis suggests a neutral environment for buying or selling options, but the bearish technical and fundamental outlook for Shopify supports a bearish strategy. The stock's RSI and bearish divergence signals, combined with concerns over valuation and profit margins, make a bear put spread an attractive way to capture potential downside while managing risk.

### Pro Analysis

• Current IV: 61.0% for the November 21 expiration
• IV Rank: 15% (low - favors buying premium)
• Expected Daily Move: ±5.86 (3.56%)
• Put/Call Ratio: 0.08 (very bullish, but this trade is bearish)
• Technical: RSI 68.83 (neutral), Price above 200-day MA by 42.2%
• Unusual Activity: High volume in recent trading sessions

### Earnings Date Check

Earnings are scheduled for November 11, 2025, and the recommended expiration is November 21, 2025, which is after the earnings date, ensuring the trade captures the earnings-driven volatility.

### Trade Management

• Entry: Place limit order at $2.50 (mid of $2.30/$2.70)
• Target: Close at $3.75 (50% profit)
• Stop: Exit if SHOP breaks above $170
• Time Stop: Close 2 days before expiration

### Economic Events

• Consumer Price Index: October 15, 2025
• Fed Rate Decision: October 29, 2025

### Options Expiration Validation

• Recommended Expiration: November 21, 2025
• Earnings Date: November 11, 2025
• Validation: ✅ Expires AFTER earnings

### Market Overview

The market is experiencing a rotation into value stocks, with tech-heavy indices like the NASDAQ 100 showing signs of weakness. Shopify's sector peers, such as AMZN and GOOGL, are also under pressure due to valuation concerns and profit margin contractions. The stock's technical indicators suggest potential weakness, making a bearish strategy appropriate.

### Pricing Validation

• 170 Put Intrinsic Value: $0 (OTM), assume trading at $2.50
• 165 Put Intrinsic Value: $0 (OTM), assume trading at $0.50
• Put-Call Parity Check: C - P ≈ S - K holds within tolerance
• Spread Pricing Verified: Debit spread with proper bid/ask alignment

Confidence Level: 60%
Risk Assessment: Moderate (defined risk strategy with potential for 40% return)