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By Ainvest in unusual-options —

🛡️ RMD $5.5M Income Play - Aggressive Ratio Diagonal Put Spread on Sleep Apnea Leader! 💰

Daily block monitor analysis featuring institutional trading activity and market movements. Educational content for investment research purposes only.

🛡️ RMD $5.5M Income Play - Aggressive Ratio Diagonal Put Spread on Sleep Apnea Leader! 💰

📅 November 20, 2025 | 🔥 Unusual Activity Detected

🎯 The Quick Take

Someone just executed a $5.5 MILLION ratio diagonal put spread on RMD this morning at 11:12:08! This sophisticated trade sold 7,000 near-term $230 puts expiring January 16th while buying only 4,000 longer-dated $200 puts expiring July 17th - creating a 1.75:1 ratio with substantial naked exposure. With ResMed trading at $243.35 and pulling back from August highs of $293, this income-focused strategy is betting on range-bound consolidation while leaving downside exposed. Translation: Institutional player collecting premium on the pullback, but taking calculated risk if GLP-1 drug concerns resurface!

📊 Company Overview

ResMed Inc. (RMD) is the global leader in sleep apnea treatment devices and respiratory care solutions:
- Market Cap: $35.5 Billion
- Industry: Medical Devices - Respiratory Equipment
- Current Price: $243.35 (17% below August high of $293.81)
- Primary Business: CPAP/BiPAP machines, masks, accessories, digital health platforms (myAir), residential care software (Brightree, MatrixCare)
- Market Position: 50-60% global market share in sleep apnea devices, dominant position strengthened by Philips Respironics' 5-7 year U.S. market absence

💰 The Option Flow Breakdown

The Tape (November 20, 2025 @ 11:12:08):

Time Symbol Side Buy/Sell Type Expiration Premium Strike Volume OI Size Spot Option Price Option Symbol
11:12:08 RMD SELL PUT $230 2026-01-16 $2.8M $230 7,000 71K 5,530 $243.35 $5.00 RMD20260116P230
11:12:08 RMD BUY PUT $200 2026-07-17 $2.7M $200 4,000 - 3,160 $243.35 $8.50 RMD20260717P200

🤓 What This Actually Means

This is a ratio diagonal put spread with aggressive income generation characteristics! Here's the anatomy:

Legs breakdown:
- 💸 Short leg: Sold 7,000 contracts $230 puts (Jan 16, 2026) collecting $2.8M ($5.00/contract)
- 🛡️ Long leg: Bought 4,000 contracts $200 puts (July 17, 2026) paying $2.7M ($8.50/contract)
- 📊 Net credit: ~$100K upfront credit ($2.8M collected - $2.7M paid)
- ⚖️ Ratio: 1.75:1 (7,000 short / 4,000 long = 3,000 naked short puts!)
- ⏰ Time spread: 57 days between expirations (capturing theta decay advantage)

What's really happening here:
This sophisticated trader is playing the volatility term structure and time decay while expressing a neutral-to-slightly-bullish view on RMD. They're collecting rich premium on near-term $230 puts (5.5% below current price) that expire January 16th, protected by longer-dated $200 puts as disaster insurance. The 1.75:1 ratio means they have 3,000 naked short puts exposed - betting RMD stays above $230 through January expiration.

The strategy:
- 🎯 Best case: RMD stays $230-$260, all Jan puts expire worthless, keep $2.8M premium
- 📉 Acceptable: RMD drifts to $220-230, July puts offset most losses on short Jan puts
- 😱 Disaster scenario: RMD breaks below $200 hard, naked exposure on 3,000 puts creates unlimited losses

Unusual Score: 🔥 Significant (Large fund allocation) - $5.5M total premium in a diagonal spread is meaningful institutional positioning, especially given the 3,000 naked puts representing $69M of stock exposure.

📈 Technical Setup / Chart Check-Up

YTD Performance Chart

RMD YTD Performance

ResMed is up +6.6% YTD with current price of $243.35, but the chart tells a volatility story. The stock surged to all-time highs of $293.81 in August 2025 before pulling back sharply to current levels - a 17% correction from the peak.

Key observations:
- 🎢 Major reversal: Violent selloff from $293 August highs through November, erasing summer gains
- 📉 Steep drawdown: April-May crash took stock from $257 to $203 (-21%), showing vulnerability to sentiment shifts
- 📊 Consolidation phase: Currently bouncing between $240-250 support after oversold conditions
- 🌊 Volume patterns: Increased distribution in October-November suggesting institutional position adjustments
- ⚠️ Technical damage: Below key moving averages, momentum turned negative

The sharp August-to-November decline likely reflects profit-taking after the stock's Q1 FY2026 earnings on October 30th showed mixed results and concerns about international growth deceleration.

Gamma Support & Resistance Levels

RMD Gamma Support & Resistance

The gamma exposure analysis reveals critical price levels where options dealers will need to hedge, creating natural support and resistance zones. These levels are particularly relevant for the $230 put strike, showing where institutional hedging activity will concentrate.

Implied Move Analysis

RMD Implied Move Analysis

The implied volatility surface indicates the market's expected price range through the January 16th expiration. This analysis directly informs the probability assessment for the ratio put spread, showing whether the $230 short strike sits within or outside the expected move.

🎪 Catalysts

🔥 Past Catalysts (Already Happened)

Q1 Fiscal Year 2026 Earnings - October 30, 2025 (3 WEEKS AGO) 📊

ResMed reported mixed results that met expectations but reflected strategic investment:

Market reaction: Stock declined 4.3% following results despite beating EBITDA estimates, with concerns centered on slower device growth in international markets - a key headwind the put spread trader is clearly aware of.

GLP-1 Drug Paradigm Shift - The Game-Changer! 💊

The market's greatest fear about ResMed has completely reversed into a positive catalyst:

What this means: The "great obesity drug scare of 2023" is definitively over. GLP-1s are HELPING, not hurting ResMed's business by driving more patients to seek OSA diagnosis and treatment. This removes a major overhang that pressured the stock earlier this year.

🚀 Upcoming Catalysts (Next 6 Months)

Q2 Fiscal Year 2026 Earnings - January 22, 2026 (62 DAYS AWAY!) 📅

The most immediate catalyst falls right between this trade's expirations:

Timing matters: This earnings report occurs 6 days after the short Jan 16 $230 puts expire, meaning the trader is avoiding the earnings volatility risk on the short leg. Smart positioning to capture theta decay without binary event exposure!

Product Innovation Pipeline 🚀

Several product launches driving competitive moats:

Manufacturing Expansion 🏭

Strategic geographic diversification reducing supply chain risk:

Philips Competitive Advantage - Multi-Year Tailwind! 🏆

The biggest structural catalyst remains Philips Respironics' prolonged absence:

Massive Addressable Market Expansion 🌍

The underdiagnosis opportunity is staggering:

⚠️ Risk Catalysts (Negative)

International Growth Deceleration 🌍

The Q1 earnings concern that likely drove this trade:

Gross Margin Pressure Points 💰

Multiple headwinds threatening the impressive 61.5% margins:

Medicare Reimbursement Cuts 💵

Government payment pressures create revenue headwind:

Valuation at 25.2x P/E 📊

Trading at 25.2x P/E with single-digit revenue growth (7.9% in Q1 FY2026) leaves limited margin for error. If growth decelerates below 7%, multiple could compress toward 20x, implying $200-210 price targets - exactly where the long July $200 puts provide downside protection.

🎲 Price Targets & Probabilities

Using the trade structure, upcoming catalysts, and technical levels, here are the scenarios through the January 16th expiration:

📈 Bull Case (20% probability)

Target: $260-$275

How we get there:
- 💪 Sentiment shift as GLP-1 positive data continues to emerge
- 📊 Analyst upgrades citing underappreciation of margin expansion (290 bps improvement)
- 🌍 International growth concerns prove temporary, next data points show reacceleration
- 🏆 New major mask product launch drives market share gains
- 📈 Technical breakout above $250 resistance triggers momentum buying back toward August levels

Key drivers needed:
- Positive commentary from management on international pipelines
- Additional hyperscaler/hospital system wins for myAir platform
- Evidence of market share gains continuing through 2026

Impact on trade: All $230 puts expire worthless on Jan 16, trader keeps full $2.8M premium. Perfect scenario.

Probability assessment: Only 20% because it requires reversal of negative technical momentum and resolution of international growth concerns within just 57 days. Stock would need to rally 10-13% from current levels.

🎯 Base Case (60% probability)

Target: $230-$250 range (WHERE THE TRADE WINS)

Most likely scenario:
- ✅ Stock continues consolidating in current range, gradually working through technical damage
- 📊 No major new catalysts emerge before Jan 16 expiration
- 🤝 GLP-1 positive narrative slowly permeates but doesn't drive immediate rally
- ⚖️ International growth concerns linger but don't worsen dramatically
- 🌊 Volatility compresses as market awaits Q2 earnings (Jan 22) for clarity
- 💤 Range-bound trading between $235-$250 through year-end holidays

This is optimal for the ratio spread:
- All 7,000 short $230 puts expire worthless on Jan 16
- Trader keeps full $2.8M premium collected
- Long $200 puts retain value for potential future protection through July
- Net P&L: ~$2.8M profit (minus time decay on long puts, maybe $200-300K erosion = ~$2.5M net)

Why 60% probability: Current price of $243 provides 5.3% cushion to $230 strike. In absence of major negative catalyst, gravity toward consolidation is high. The trader structured this trade KNOWING there's no earnings risk on the short leg.

📉 Bear Case (20% probability)

Target: $200-$230 (TESTS THE SPREAD!)

What could go wrong:
- 😰 Additional negative international data emerges (Asia-Pacific demand deterioration)
- 💸 Margin pressure materializes faster than expected from freight costs or tariffs
- 🇨🇳 China market issues arise (regulatory changes, domestic competition)
- ⚖️ Unexpected regulatory headwind (Medicare cuts worse than anticipated)
- 📉 Broader medical device sector selloff drags RMD lower
- 🚨 Fisher & Paykel or other competitor announces major innovation threatening market share
- 💔 Break below $230 psychological support triggers cascade to $200-210 range

Critical support levels:
- 🛡️ $230: Short put strike - MUST HOLD or spread moves into loss territory
- 🛡️ $220: Technical support from May 2025 bounce
- 🛡️ $200: Long put strike + major psychological level

Impact on trade (the naked exposure risk!):
- Stock at $220 on Jan 16: 7,000 short puts worth $10 each = -$7M loss, 4,000 long puts worth ~$15 each (accounting for time decay) = +$6M offset, NET LOSS: ~$1M
- Stock at $200 on Jan 16: 7,000 short puts worth $30 each = -$21M loss, 4,000 long puts worth $0 (at strike) = $0 offset from intrinsic (but paid $8.50), NET LOSS: ~$18M!
- Stock below $200: Losses accelerate - for every $1 below $200, lose $300K on the 3,000 naked puts

Probability assessment: 20% because it requires multiple negative catalysts to align AND break through $230 support. RMD's fundamentals remain solid with Philips absence, GLP-1 tailwind, and massive underdiagnosed market. However, the trader clearly considers this scenario possible enough to hedge with 4,000 $200 puts.

💡 Trading Ideas

🛡️ Conservative: Stock Purchase at Support

Play: Buy shares if/when RMD pulls back to $230-235 range

Why this works:
- 🎯 $230 level is where institutions are selling puts - they expect support here
- 💰 Attractive valuation at 25x P/E for business with 61.5% gross margins and 7-9% growth
- 🏆 Philips competitive advantage provides multi-year revenue visibility
- 📈 80-90% of OSA cases undiagnosed = massive TAM expansion opportunity
- 💊 GLP-1 drugs now proven complementary, removing major overhang
- 📊 Simple, easy to understand - own the business

Entry criteria:
- 🎯 Target entry: $230-235 (5% cheaper than current)
- 🛑 Stop loss: $215 (7% below entry, just above $200 disaster floor)
- 📈 Upside target: $270-280 (15-20% gain over 6-12 months)

Position sizing: Start with 50% position at $235, add 25% more at $230 if it gets there, hold final 25% cash if it breaks below $230

Risk level: Low to Moderate (stock ownership) | Skill level: Beginner-friendly

Expected holding period: 6-12 months to capture Q2-Q4 earnings cycle and product innovation catalysts

⚖️ Balanced: Sell Cash-Secured Puts (Copy the Trade!)

Play: Sell cash-secured puts at $230 strike, same expiration as the institutional trade

Structure: Sell Feb $230 puts (if Jan unavailable, use Feb 21 expiration)

Why this works:
- 🤝 Essentially copying the institutional short leg, but fully cash-secured (no leverage risk)
- 💰 Collect premium while waiting to buy stock at desired $230 level
- 🎯 If assigned, you own RMD at effective cost basis of ~$225 (after premium)
- 🛡️ Get paid to wait - if stock stays above $230, keep full premium and try again
- ⏰ Expiration timing avoids Jan 22 earnings volatility

Estimated P&L (check current option prices):
- 💰 Collect ~$5-7 per contract ($500-700 per put)
- 📊 Margin required: $23,000 per contract (must have cash set aside)
- 📈 Max profit: Keep premium if RMD above $230 at expiration
- 📉 Risk: Own stock at $230 (which you should be comfortable with at that price)
- 🎯 Effective cost basis if assigned: $223-225

Entry timing:
- ⏰ Enter when RMD trading $238-245 (current range) for 2-3% premium
- ❌ Skip if RMD already below $232 (too close to strike)

Management:
- If RMD rallies to $250+: Buy back puts for 50% profit, reset at higher strike
- If approaching expiration with RMD $230-235: Roll to next month for credit
- If assigned: Great! You bought at your target price

Risk level: Moderate (obligation to buy stock) | Skill level: Intermediate

🚀 Aggressive: Ratio Call Spread (Opposite Direction!)

Play: Counter the put ratio spread with a call ratio spread for income

Structure: Buy 10 Feb $245 calls, Sell 20 Feb $260 calls

Why this could work:
- 💸 Collect net credit while betting on range-bound price action (opposite of the put spread strategy)
- 🎯 Profit zone: $245-$260 where stock likely consolidates
- 📊 If RMD stays $245-255, both legs expire ITM but ratio works in your favor
- ⚡ Captures rebound from current $243 toward $250-255 resistance
- 💰 Benefits from volatility compression (sell more expensive shorter-dated calls)

Why this could blow up (SERIOUS RISKS):
- 🚀 UNLIMITED UPSIDE RISK: If RMD breaks out above $260, losses accelerate on 10 naked short calls
- 😱 Stock rallies to $280 (back toward August highs): Lose $2,000 per naked call × 10 = -$20,000 total
- 📰 Unexpected positive catalyst (major contract win, analyst upgrade to $300 target) gaps stock up
- ⚠️ Naked call exposure means potential assignment of 1,000 shares at $260 ($260,000 stock ownership!)
- 💰 Margin requirements: Broker may require $15,000-25,000 margin for naked calls

Estimated P&L (adjust for current option prices):
- 💰 Net credit: ~$1-2 per spread ($100-200 total for 10:20 ratio)
- 📈 Max profit: Achieved if RMD at exactly $260 at expiration = ~$1,500-2,000
- 📉 Max loss below $245: Lose premium on long calls = -$1,000-1,500
- 🚨 Unlimited loss above $260: Every $1 above $260 = -$1,000 loss (10 naked calls)

Breakeven:
- 📊 Lower breakeven: ~$244 (cost of long calls)
- 🔥 Upper breakeven: ~$262-265 (where naked call losses exceed max profit)
- 🎯 Profit zone: $247-262 (narrow 6% range)

CRITICAL WARNING - DO NOT attempt unless you:
- ✅ Understand ratio spreads and naked call risk thoroughly
- ✅ Have experience managing multi-leg options through expiration
- ✅ Can handle potential assignment of 1,000 shares ($260,000 stock)
- ✅ Have sufficient margin/capital to cover naked call exposure
- ✅ Can actively monitor position daily and adjust if RMD approaches $260
- ⏰ Plan to close/roll position at 50% profit or if stock hits $258 (defense)

Risk level: EXTREME (unlimited upside risk) | Skill level: Advanced only

Probability of profit: ~45-50% (narrow profit zone requires precise price action)

⚠️ Risk Factors

Don't get caught by these potential landmines:

  • ⏰ Ratio spread naked exposure: This trade has 3,000 naked short puts representing $69M of stock exposure below $230. If RMD breaks down hard to $200-210, losses could reach $15-20M. The long $200 puts provide partial hedge, but the 1.75:1 ratio leaves significant unprotected downside. For every $1 RMD trades below $200, the position loses $300,000.

  • 🌍 International growth deceleration is real: Q1 results showed Europe, Asia, Rest of World device growth slowing to mid-single digits vs. historical high-single to double-digit rates. Management expects continued normalization post-Philips surge. If this trend worsens (China slowdown, Japan tender delays, European healthcare budget cuts), it challenges the growth narrative at current 25x valuation.

  • 💰 Margin pressure from freight and tariffs: Middle East conflict and Asian port congestion driving freight costs higher. Potential tariffs from February 2025 trade policy could materially impact supply chain costs. The impressive 61.5% gross margin expansion could reverse quickly, causing EPS misses and multiple compression.

  • 💵 Medicare reimbursement cuts hit revenue: 2.93% reduction in CY 2025 Medicare Physician Fee Schedule creates 2-3% headwind to U.S. DME revenue. With U.S. representing ~50% of sales, this is material. Additional Medicare cuts in 2026 budget negotiations could worsen impact.

  • 🏥 Philips could return sooner than expected: While consent decree suggests 5-7 year U.S. absence, if Philips resolves regulatory issues by 2026-2027, the competitive landscape shifts dramatically. ResMed would face pricing pressure and market share erosion, potentially triggering 15-20% stock decline. The $230 put strikes don't provide much cushion in this scenario.

  • 📉 Valuation offers limited margin of safety: At 25.2x P/E with 7.9% revenue growth, RMD trades at growth-stock multiples despite maturing business profile. Peer medical device companies trade at 18-22x forward earnings. If growth decelerates below 6-7%, multiple compression toward 20x implies ~$195-205 price targets - exactly where the catastrophic losses occur on this ratio spread.

  • 🤖 GLP-1 long-term uncertainty remains: While current data shows complementary benefits, the 5-10 year outlook for significant weight loss potentially curing OSA is unknown. If GLP-1 adoption accelerates and long-term studies show reduced CPAP need, the entire TAM thesis changes. Market could front-run this concern before data emerges.

  • 📊 Technical breakdown momentum: Stock down 17% from August $293 highs with negative technical setup. Trading below key moving averages with distribution patterns in October-November. If $240 support fails, next technical support isn't until $220-225, creating vacuum zone where selling accelerates. The $230 short puts are right in the danger zone.

  • 🎢 High implied volatility risks IV crush: If RMD consolidates quietly into year-end, volatility compression could hurt both put legs. The short $230 puts benefit from this, but the long $200 puts lose value faster from theta decay and vega contraction. Net effect could be worse than expected if stock stays range-bound but vol collapses.

🎯 The Bottom Line

Real talk: This $5.5M ratio diagonal put spread is a sophisticated income-generation play by institutional traders who believe RMD is range-bound through January. They're collecting fat premium on the $230 puts while protecting against disaster with $200 puts - but leaving 3,000 naked puts exposed between $200-$230. This is aggressive portfolio management, not speculation.

What this trade tells us:
- 🎯 Sophisticated player expects RMD consolidation in $230-$250 range through Jan 16 (60%+ probability)
- 💰 They're comfortable taking downside risk below $230 because fundamentals support $200 floor
- ⚖️ The 1.75:1 ratio shows confidence in support levels - wouldn't leave naked exposure if crash expected
- 📊 Avoiding Jan 22 earnings by using Jan 16 expiration on short leg = smart risk management
- 🛡️ July $200 puts hedge catastrophic scenarios (earnings disasters, regulatory shocks, Philips return)

This is income farming with calculated risk, not directional betting.

If you own RMD:
- ✅ Current $243 level is reasonable hold - Philips tailwind, GLP-1 positive data, and massive undiagnosed market support long-term thesis
- 📊 Set mental stop at $228-230 (where institutions sold puts) to protect against international growth deterioration
- ⏰ Don't panic if stock drifts to $235-238 - that's expected consolidation after 17% correction
- 🎯 If bounce to $255+, consider trimming 20-30% to lock in gains before Q2 earnings
- 🛡️ Consider selling covered calls at $250-255 strikes to generate income during consolidation

If you're watching from sidelines:
- 🎯 $230-235 is the sweet spot entry - exactly where institutions are comfortable selling puts
- ⏰ Wait for weakness rather than chasing current $243 - stock has downward momentum
- 📈 Looking for confirmation of: international growth stabilization in Q2 results (Jan 22), margin sustainability, mask innovation traction
- 🚀 Longer-term (12-18 months), underdiagnosed market penetration and GLP-1 synergy are legitimate catalysts for $280-300
- ⚠️ Current valuation requires steady 8-10% growth - one or two quarters of slowdown triggers multiple compression

If you're bearish:
- 🎯 Short thesis has merit - international growth concerns, valuation stretch, technical breakdown
- 📊 But fighting 50-60% market share position with Philips sidelined is dangerous
- ⚠️ Better to wait for break below $230 to confirm breakdown rather than shorting at $243
- 📉 Put spreads ($240/$230 or $230/$220) offer defined-risk way to play downside
- ⏰ Watch Jan 22 earnings closely - if international weakness accelerates, that's confirmation signal

Mark your calendar - Key dates:
- 📅 January 16, 2026 - Short put expiration (57 days away) - critical day for this trade!
- 📅 January 22, 2026 - Q2 FY2026 earnings (6 days after put expiration) - intentionally avoided
- 📅 July 17, 2026 - Long put expiration (protection window through H1 2026)
- 📅 Mid-2025 - AirSense 11 India launch, additional product innovations expected
- 📅 2026-2029 - Philips competitive advantage window (multi-year tailwind)

Final verdict: RMD's long-term story remains compelling - dominant market position, margin expansion, GLP-1 synergy proven, and massive undiagnosed market. BUT, near-term (next 60 days) likely range-bound $230-$250 as market digests international growth concerns and awaits Q2 earnings clarity.

The institutional put spread trade signals: "We're bullish long-term, but want to collect income during the consolidation phase while protecting against tail risks." That's a smart, patient approach retail traders should consider copying.

Be patient. Wait for $230-235. The sleep apnea revolution isn't going anywhere. 💤

Disclaimer: Options trading involves substantial risk of loss and is not suitable for all investors. This analysis is for educational purposes only and not financial advice. Ratio spreads create naked short exposure with potentially unlimited losses if the stock moves adversely. The trade described has 3,000 naked short puts representing $69M of exposure below $230. Past performance doesn't guarantee future results. Always do your own research and consider consulting a licensed financial advisor before trading. Only trade complex strategies like ratio spreads if you fully understand the risks and have sufficient capital to cover potential losses.

About ResMed Inc.: ResMed is a global leader in connected medical devices for sleep apnea, COPD, and other respiratory conditions, with a market cap of $35.5 billion. The company holds 50-60% global market share in OSA treatment devices and benefits from a multi-year competitive advantage due to Philips Respironics' prolonged U.S. market absence.

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