What if you could mimic the moves of some of the best-informed traders on the planet? That’s the idea behind a new series we’re launching that’s focused on what we’ll call “smart money” option trades.
In short, we’re using Market Chameleon to scan the options market for unusual activity and identifying some of the most interesting mega trades – relatively large volume options trades we can potentially mimic… but on a smaller scale!
While we can’t be 100% certain of the exact options strategies our “smart money” traders are employing on these trades, these are our best guesses based on the information we do have.
That said, here are 5 of the most interesting “smart money” trades we came across in the past week.
Trade #1: Trader Just Bet $2,227,000 That Walt Disney Co (NYSE: DIS) Will Have a Significant Move in Either Direction in 4 Weeks.
On Monday, December 14, 2020, a “smart money” trader seems to have bought 1,700 of the 15-Jan-21 $170.00 call options on DIS for $6.80 per share. His outlay was $1,156,000 for these options. In what appears to be a Long Straddle Strategy (wherein the investor simultaneously purchases a call option and a put option on the same underlying asset with the same expiration date and strike price), he also seems to have bought 1,700 of the 15-Jan-21 $170.00 put options on DIS for $6.30 per share, which is an outlay of $1,071,000. His total outlay for this Long Straddle Strategy was $2,227,000.
DIS – Long Straddle Options Trade
DIS will need to rise to $183.10 for the call option trade to break even — around a 6% return from the current price of $173.12. And then for every $1 the stock rises above $183.10, our “smart money” trader will make $170,000!
DIS will need to decline to $156.90 for the put option trade to break even — around a 9% return from the current price of $173.12. And then for every $1 the stock decreases below $156.90, our “smart money” trader will make $170,000!
He seems to be anticipating the underlying stock to have a significant move in either direction within the next 4 weeks.
Trade #2: Trader Just Bet $500,000 That Microsoft Corporation (NASDAQ: MSFT) Will Rise 14% by mid-March
On Wednesday, December 16, 2020, a “smart money” trader seems to have bought 1,000 of the 19-Mar-21 $230.00 call options on MSFT for $8.40 per share. Her outlay was $840,000 for these options. In what appears to be a Bull Call Spread Strategy (wherein the investor buys a call option with a lower strike price and sells a call option with a higher strike price but with the same expiry date), she also seems to have sold 1,000 of the 19-Mar-21 $250.00 call options on MSFT for $3.40 per share, which is an inflow of $340,000. Her total outlay for this Bull Call Spread Strategy was $500,000.
MSFT – Bull Call Spread Options Trade
MSFT will need to rise to $235.00 for the call option trade to break even – around a 7% return from the current price of $219.28. Then, for every $1 the stock rises above $235.00, our “smart money” trader will make $100,000!
She seems to be anticipating the underlying stock to surge until $250.00, which is a nearly 14% return from the current price of $219.28.
Trade #3: Trader Just Made $204,732 Betting That Moderna Inc. (NASDAQ: MRNA) Will Stay Bullish For The Next 4 Weeks.
On Tuesday, December 15, 2020, a “smart money” trader seems to have bought 242 of the 15-Jan-21 $135.00 put options on MRNA for $12.90 per share. His outlay was $312,180 for these options. In what appears to be a Bull Put Spread Strategy (wherein the investor buys a put option with a lower strike price and sells a put option with a higher strike price but with the same expiry date), he also seems to have sold 242 of the 15-Jan-21 $150.00 put options on MRNA for $21.36 per share, which is an inflow of $516,912. His total inflow for this Bull Put Spread Strategy was $204,732.
MRNA – Bull Put Spread Options Trade
A Bull Put Spread Strategy is typically used to generate premium income based on a trader’s bullish view of a stock or index. He seems to be anticipating that the price of the stock would close above $150.00 by 15-Jan-2021, which is a nearly 9% upside from the current levels.
Trade #4: Trader Just Bet $675,000 That Gap Inc. (NYSE: GPS) Will Rise 33% in 4 Weeks.
On Monday, December 14, 2020, a “smart money” trader seems to have bought 7,500 of the 15-Jan-21 $22.00 call options on GPS for $0.77 per share. Her outlay was $577,500 for these options. In what appears to be a Bull Call Spread Strategy (wherein the investor buys a call option with a lower strike price and sells a call option with a higher strike price but with the same expiry date), she also seems to have sold 7,500 of the 15-Jan-21 $27.00 call options on GPS for $0.12 per share, which is an inflow of $90,000. In what appears to be a hedge, she also seems to have bought 15-Jan-21 $17.00 put options on GPS for $0.25 which is an outlay of $187,500. Her total outlay for this Bull Call Spread Strategy with Hedge was $675,000.
GPS – Bull Call Spread With Hedge Options Trade
GPS will need to rise to $22.90 for the call option trade to break even — around a 13% return from the current price of $20.33. Then, for every $1 the stock rises above $22.90, our “smart money” trader will make $750,000!
She seems to be anticipating the underlying stock to surge until $27.00, which is a nearly 33% return from the current price of $20.33.
Trade #5: Trader Just Bet $841,000 That Snowflake Inc. (NYSE: SNOW) Will Rise 6% in ONE Week.
On Tuesday, December 15, 2020, a “smart money” trader seems to have bought 500 of the 24-Dec-20 $300.00 call options on SNOW for $23.22 per share. His outlay was $1,161,000 for these options. In what appears to be a Bull Call Spread Strategy (wherein the investor buys a call option with a lower strike price and sells a call option with a higher strike price but with the same expiry date), he also seems to have sold 500 of the 24-Dec-20 $350.00 call options on SNOW for $6.40 per share, which is an inflow of $320,000. His total outlay for this Bull Call Spread Strategy was $841,000.
SNOW – Bull Call Spread Options Trade
SNOW needed to rise to $316.82 for the call option trade to break even. Then, for every $1 the stock rises above $316.82, our “smart money” trader will make $50,000!
He seems to be anticipating the underlying stock to surge until $350.00, which is a nearly 6% return from the current price of $329.97.
Happy Trading!
— Trades of The Day Research Team