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 $907,500 That United States Steel Corporation (NYSE: X) Will Decline 39% in 10 Weeks
On Wednesday, February 3, 2020, a “smart money” trader seems to have bought 7,500 of the 16-Apr-21 $15.00 put options on X for $1.54 per share. His outlay was $1,155,000 for these options. In what appears to be a Bear Put Spread Strategy (wherein the investor buys a put option with a higher strike price and sells a put option with a lower strike price but with the same expiry date), he also seems to have sold 7,500 of the 16-Apr-21 $10.00 put options on X for $0.33 per share, which is an inflow of $247,500. His total outlay for this Bear Put Spread Strategy was $907,500.
X – Bear Put Spread Options Strategy
X needs to decline to $13.79 for the put option trade to break even – around a 15% return from the current price of $16.26. Then, for every $1 the stock moves below $13.79, our “smart money” trader will make $750,000! It may be noted that the trader’s profit will be limited till the price of $10.00 as he had sold the $10.00 strike price put options.
He seems to be anticipating the underlying stock to decline until $10.00, which is a nearly 39% return from the current price of $16.26.
Trade #2: Trader Just Bet $8,090,000 That iShares Silver Trust (NYSEARCA: SLV) Will Have a Significant Move in Either Direction in 8 Months.
On Tuesday, February 2, 2021, a “smart money” trader seems to have bought 10,000 of the 30-Sep-21 $27.00 call options on SLV for $3.04 per share. Her outlay was $3,040,000 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), she also seems to have bought 10,000 of the 30-Sep-21 $27.00 put options on SLV for $5.05 per share, which is an outlay of $5,050,000. Her total outlay for this Long Straddle Strategy was $8,090,000.
SLV – Long Straddle Options Strategy
SLV will need to rise to $35.09 for the call option trade to break even — around a 41% return from the current price of $24.93. And then for every $1 the ETF rises above $35.09, our “smart money” trader will make $1,000,000!
SLV will need to decline to $18.91 for the put option trade to break even — around a 24% return from the current price of $24.93. And then for every $1 the ETF decreases below $18.91, our “smart money” trader will make $1,000,000!
She seems to be anticipating the underlying ETF to have a significant move in either direction within the next 8 Months.
Trade #3: Trader Just Bet $779,496 That FireEye Inc. (NASDAQ: FEYE) Will Rise 11% in 6 Weeks
On Wednesday, February 3, 2021, a “smart money” trader seems to have bought 6,236 of the 19-Mar-21 $21.00 call options on FEYE for $1.99 per share. His outlay was $1,240,960 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 6,236 of the 19-Mar-21 $25.00 call options on FEYE for $0.74 per share, which is an inflow of $461,464. His total outlay for this Bull Call Spread Strategy was $779,496.
FEYE – Bull Call Spread Options Strategy
FEYE needs to rise to $22.25 for the call option trade to break even — around an 11% return from the current price of $20.07. Then, for every $1 the stock rises above $22.25, our “smart money” trader will make $623,600!
He seems to be anticipating the underlying stock to surge until $25.00, which is a nearly 25% return from the current price of $20.07.
Trade #4: Trader Just Made $560,000 Betting That Up Fintech Holding Ltd (NASDAQ: TIGR) Will Stay Bearish For The Next 2 Weeks.
On Wednesday, February 3, 2021, a “smart money” trader seems to have bought 8,000 of the 19-Feb-21 $35.00 call options on TIGR for $1.15 per share. Her outlay was $920,000 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 8,000 of the 19-Feb-21 $30.00 call options on TIGR for $1.85 per share, which is an inflow of $1,480,000. Her total inflow for this Bear Call Spread Strategy was $560,000.
TIGR – 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 $30.00 until 19-Feb-2021.
Trade #5: Trader Just Bet $750,000 That Alcoa Corp (NYSE: AA) Will Rise 51% in 6 Months.
On Wednesday, February 3, 2021, a “smart money” trader seems to have bought 10,000 of the 16-Jul-21 $25.00 call options on AA for $1.40 per share. His outlay was $1,400,000 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 10,000 of the 16-Jul-21 $30.00 call options on AA for $0.65 per share, which is an inflow of $650,000. His total outlay for this Bull Call Spread Strategy was $750,000.
AA – Bull Call Spread Options Strategy
AA needs to rise to $25.75 for the call option trade to break even — around a 29% return from the current price of $19.90. Then, for every $1 the stock rises above $25.75, our “smart money” trader will make $1,000,000!
He seems to be anticipating the underlying stock to surge until $30.00, which is a nearly 51% return from the current price of $19.90.
Happy Trading!
— Trades of The Day Research Team
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