Unusually High Volume in Deep Out-of-the-Money Vertiv Call Options Shows Investors Bullish on VRT

Unusually High Volume in Deep Out-of-the-Money Vertiv Call Options Shows Investors Bullish on VRT

Mark R. Hake, CFA

Mon, September 14, 2026 at 8:30 PM GMT+3 4 min read

• VRT -1.17%

Institutional investors have traded huge volumes of out-of-the-money call options in Vertiv Holdings (VRT) that expire in almost 16 months. This is a huge bet on the growth of its AI data center business.

VRT is trading at $236.26 in midday trading today. VRT has been sliding over the past three months, as the chart below shows. That's even after strong Q2 free cash flow (FCF) results.

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However, these unusual call options have a strike price of $380.00. That's over 60% higher. Moreover, the premium paid was $35.75, so the breakeven point is $415.75, or +76% over today's price.

This is shown in today's Barchart Unusual Stock Options Activity Report. It shows that over call option contracts have traded at this strike price expiring in 494 days. That's over 42 times the prior number of contracts outstanding. Why would an investor do this?

One reason why a buyer may have done this is that there is plenty of time for VRT to move higher. The expiration date is January 21, 2028, almost 16 months from today, i.e., one year and four months (494 days to expiry, or DTE).

In other words, the investor buying these shares may have felt it was better to pay $35.75 for 8,600 call options (representing 860K shares), or $30.745 million, rather than own just 130K shares for the same cost.

Let's look into why they like VRT so much.

Strong FCF Forecasts for Vertiv Holdings

Vertiv is directly benefiting from strong data center buildouts and capex investments by hyperscalers throughout the world. Its hardware helps reduce the ongoing costs, including cooling, of running large data centers.

As a result, management if projecting strong revenue growth, and the company is generating high free cash flow (FCF) margins. Last quarter, its revenue rose 24% YoY, and FCF was up 234%.

More importantly, its FCF margin was 28.3% of revenue, and analysts are projecting significantly higher revenue over the next two years. For example, Seeking Alpha's survey of 28 analysts shows $14.02 billion in sales this year and $18.18 billion in sales for 2027.

So, if the company keeps making a 28% FCF margin, and assuming sales by 2028 are projected to hit $20 billion, within one year from today, analysts will be projecting much higher FCF:

$18.18b to $20 b in sales x 28% = $19b x 0.28 = $5.32 billion FCF

Assuming the market values this FCF with a 3.0% FCF yield metric, its fair market value (FMV) will be above $177 billion:

$5.32b / 0.03 = $177.3 billion FMV

That's 94% over today's market cap of $91.4 billion, according to Yahoo! Finance. In other words, the price target (PT) in one year will likely be $458:

$236.26 x 1.94 = $458.34 PT

Buyers and Sellers of the OTM Calls

Buyers. This explains why an investor would be willing to buy OTM calls today that have a $380 strike price and a breakeven price of $415.75. It implies the intrinsic value of these calls will be:

$458.34 PT- $380.00 strike = $78.34 intrinsic value

$78.34 / $35.75 cost -1 = +119% potential upside

The buyer expects to more than double their investment. Moreover, this does not even include any extrinsic value that the call options will have in one year.

Sellers. Sellers of these calls, most likely covered call sellers who already own shares, make a nice yield. They are happy to collect a 15% yield (i.e., $35.75/$236.26) with the option of selling at a price that's 60.8% higher.

In other words, their total potential return is over 76%, but they will have to hold their VRT shares over this period. That makes them essentially bullish

Both the buyers and sellers of these calls believe in Vertiv Holdings. This is based on strong demand for data centers and the company's growth rate related to the AI buildout boom.

On the date of publication, Mark R. Hake, CFA 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. This article was originally published on Barchart.com