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 $251,450 That General Motors Company (NYSE: GM) Will Rise 25% in 8 Weeks
On Tuesday, January 19, 2021, a “smart money” trader seems to have bought 5,029 of the 19-Mar-21 $60.00 call options on GM for $2.94 per share. His outlay was $1,478,530 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 10,058 of the 19-Mar-21 $70.00 call options on GM for $1.22 per share, which is an inflow of $1,227,080. His total outlay for this Bull Call Spread Strategy was $251,450.
GM – Bull Call Spread Options Strategy
GM needs to rise to $61.72 for the call option trade to break even — around a 10% return from the current price of $55.86. Then, for every $1 the stock rises above $61.72, our “smart money” trader will make $502,900!
He seems to be anticipating the underlying stock to surge until $70.00, which is a nearly 25% return from the current price of $55.86.
Trade #2: Trader Just Made $462,392 Betting That Ford Motor Company (NYSE: F) Will Stay Bearish For The Next 4 Weeks.
On Wednesday, January 20, 2021, a “smart money” trader seems to have bought 16,514 of the 19-Feb-21 $12.00 call options on F for $0.18 per share. Her outlay was $297,252 for these options. In what appears to be a Bear Call spread Strategy (wherein the investor buys a call option with a higher strike price and sells a call option with a lower strike price, but with the same expiry date), she also seems to have sold 16,514 of the 19-Feb-21 $11.00 call options on F for $0.46 per share, which is an inflow of $759,644. Her total inflow for this Bear Call Spread Strategy was $462,392.
F – Bear Call Spread Options Strategy
A Bear Call Spread strategy is typically used to generate premium income based on a trader’s bearish view of a stock or index. She seems to be anticipating that the price of the stock would not cross above $11.00 until 19-Feb-2021.
Trade #3: Trader Just Bet $911,750 That CVS Health Corp (NYSE: CVS) Will Have a Significant Move in Either Direction in 4 Weeks.
On Wednesday, January 20, 2021, a “smart money” trader seems to have bought 1,750 of the 19-Feb-21 $76.00 call options on CVS for $1.84 per share. His outlay was $322,000 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 1,750 of the 19-Feb-21 $76.00 put options on CVS for $3.37 per share, which is an outlay of $589,750. His total outlay for this Long Straddle Strategy was $911,750.
CVS – Long Straddle Options Strategy
CVS will need to rise to $81.21 for the call option trade to break even — around an 8% return from the current price of $75.25. And then for every $1 the stock rises above $81.21, our “smart money” trader will make $175,000!
CVS will need to decline to $70.79 for the put option trade to break even — around a 6% return from the current price of $75.25. And then for every $1 the stock decreases below $70.79, our “smart money” trader will make $175,000!
He seems to be anticipating the underlying stock to have a significant move in either direction within the next 4 weeks.
Trade #4: Trader Just Bet $1,120,000 That Marvell Technology Group Ltd. (NASDAQ: MRVL) Will Rise 20% in 4 Weeks.
On Wednesday, January 20, 2021, a “smart money” trader seems to have bought 5,000 of the 19-Feb-21 $55.00 call options on MRVL for $2.74 per share. Her outlay was $1,370,000 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 5,000 of the 19-Feb-21 $65.00 call options on MRVL for $0.50 per share, which is an inflow of $250,000. Her total outlay for this Bull Call Spread Strategy was $1,120,000.
MRVL – Bull Call Spread Options Strategy
MRVL needs to rise to $57.24 for the call option trade to break even — around a 6% return from the current price of $54.08. Then, for every $1 the stock rises above $57.24, our “smart money” trader will make $500,000!
She seems to be anticipating the underlying stock to surge until $65.00, which is a nearly 20% return from the current price of $54.08.
Trade #5: Trader Just Bet $410,000 That iShares iBoxx $ Inv Grade Corporate Bond ETF (NYSE: LQD) Will Rise 3% in 5 Months.
On Tuesday, January 19, 2021, a “smart money” trader seems to have bought 4,100 of the 18-Jun-21 $137.00 call options on LQD for $1.76 per share. His outlay was $721,600 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 4,100 of the 18-Jun-21 $140.00 call options on LQD for $0.76 per share, which is an inflow of $311,600. His total outlay for this Bull Call Spread Strategy was $410,000.
LQD – Bull Call Spread Options Strategy
LQD needs to rise to $138.00 for the call option trade to break even — around a 1% return from the current price of $136.34. Then, for every $1 the stock rises above $138, our “smart money” trader will make $410,000!
He seems to be anticipating the underlying stock to surge until $140.00, which is a nearly 3% return from the current price of $136.34.
Happy Trading!
— Trades of The Day Research Team
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