To The Moon

SK Hynix (SKHY) has seen extreme volatility since its listing, with IV surging to 130% — a classic setup where fundamentals are solid but short-term panic prevails, often creating opportunities for deep OTM option sellers.

This post walks you through the fundamental logic, market sentiment, and the complete trade setup behind a Sell Put.

Part 1: Why Won't It Fall Much?

HSBC's report laid out the current situation in the Korean stock market clearly: the market is indeed facing the risk of a "Minsky moment" due to high leverage — the leverage factors that drove stock prices higher over the past few months are now reversing, and the daily rebalancing of single-stock leveraged ETFs amplifies selling pressure during downturns.

HSBC estimates that if stock prices fall another 10%, just SK Hynix and Samsung Electronics alone could trigger billions of dollars in forced liquidations, impacting market liquidity.

But the key difference lies in earnings: benefiting from continued strong data center spending in the U.S., Korean corporate earnings are expected to grow nearly 300% in 2026, while current valuations (around 6–8.6x P/E) are at historical lows. This stands in sharp contrast to the 2015 Chinese A-share leverage bubble, which featured high valuations and low earnings.

Conclusion: In the short term, we need to be wary of sharp volatility from deleveraging. However, solid earnings fundamentals + low valuations limit the potential for a systemic collapse, with medium-to-long-term fundamentals still providing support. This is exactly why we have the confidence to be deep OTM sellers.

Part 2: Panic Premium Is Rich

• Based on recent option open interest data, puts at 145 and 150 form key support zones.

• Calls at 180 and 185 form resistance zones.

• Current IV stands at 130.83%, with a Call/Put Ratio of just 0.55 — strong hedging demand, cautious market sentiment, and extremely large expected moves.

• The reference range for the 7/24 expiry is approximately 145–200 USD (based on volatility and OI distribution).

The stronger the hedging demand and the higher the IV, the fatter the premium sellers can capture.

Part 3: Strategy — Sell Put

Sell the SKHY 85 Put expiring August 21 $SKHY 20260821 85.0 PUT$ .

• Each contract = 100 shares, premium collected = $110 ($1.10 × 100).

• Margin requirement ≈ $1,172.

• As long as the stock price at expiry is ≥ $85, the full $110 is pocketed with no obligation to buy.

• Approximate annualized return ≈ 12.48% (based on premium / margin and days to expiry).

Loss condition: Breakeven = $83.90 ($85 − $1.10). Losses only start below this level, and the loss = (Strike 85 − Price at Expiry) − Premium Collected.

Greeks: Delta is only −0.003, meaning directional risk is extremely low. Theta is −0.073 (positive for sellers), and with 36 days remaining, it's still in the "accelerated decay zone" (within 45 days), making time decay work in the seller's favor.

Part 4: Why Choose the 85 Strike?

At $85, this strike is far below the current price of $176.46 — deep OTM, roughly 48% of the current stock price. This aligns with HSBC's view: Korean corporate earnings growth remains strong (expected 300% growth) and valuations are at historical lows. Even under deleveraging pressure, a drop to $85 would imply a market cap evaporation of over 50%, which is highly unlikely, providing a very substantial margin of safety.

Additionally, during Wednesday's options flow monitoring on July 15, we observed significant institutional selling of the August 21 85 Put $SKHY 20260821 85.0 PUT$ , with open interest reaching 54,000 contracts.

Part 5: Why Choose the August 21 Expiry (36 Days Out)?

At 36 days, this expiry sits right in the "Theta acceleration zone" (within 45 days), where time value begins to decay at an accelerated pace. At the same time, this expiry extends beyond the short-term deleveraging turbulence, giving the market enough time to absorb selling pressure. By choosing this expiry, we can capture both time value decay and volatility contraction in an environment of extreme volatility.

Part 6: Why Sell Puts in This Market?

HSBC believes the Korean market's fundamentals are far superior to China's 2015 leverage bubble, with low valuations and strong earnings providing medium-to-long-term support. However, the short-term Call/Put Ratio of 0.55 and IV at 130% indicate strong hedging demand.

Selling deep OTM puts allows us to capture this extreme IV premium — the profit condition is simply that the stock doesn't crash to 85, making it a suitable strategy in a market with high volatility but solid fundamentals.

Part 7: How to Set a Stop Loss?

The "halved" price level itself is hard to breach. This trade is primarily affected by volatility and sensitive to downside moves. In practice, you can monitor the Korean stock market's movement: if the Korea ETF EWY breaks below 150, it would signal continued weakness and rising deleveraging pressure — that would be the time to consider closing the position for a stop loss, which is more flexible than fixing a rigid stock price level.

Part 8: Suggested Entry Timing

In the early days of SKHY's listing, IV is at an extreme high and premiums are at their richest. You can enter when price volatility is high and IV remains elevated, maximizing the collection of time value and volatility premium.