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 $2,274,000 That Cisco Systems, Inc. (NASDAQ: CSCO) Will Have a Significant Move in Either Direction in 6 Weeks.
On Wednesday, February 10, 2021, a “smart money” trader seems to have bought 6,000 of the 19-Mar-21 $50.00 call options on CSCO for $0.50 per share. Her outlay was $300,000 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 6,000 of the 19-Mar-21 $50.00 put options on CSCO for $3.29 per share, which is an outlay of $1,974,000. Her total outlay for this Long Straddle Strategy was $2,274,000.
CSCO – Long Straddle Options Strategy
CSCO will need to rise to $53.79 for the call option trade to break even — around a 14% return from the current price of $47.24. And then for every $1 the stock rises above $53.79, our “smart money” trader will make $600,000!
CSCO will need to decline to $46.21 for the put option trade to break even — around a 2% return from the current price of $47.24. And then for every $1 the stock decreases below $46.21, our “smart money” trader will make $600,000!
She seems to be anticipating the underlying stock to have a significant move in either direction within the next 6 weeks.
Trade #2: Trader Just Bet $150,000 That AMC Entertainment Holdings Inc. (NYSE: AMC) Will Decline 48% in 11 Weeks
On Wednesday, February 10, 2020, a “smart money” trader seems to have bought 1,000 of the 05-Mar-21 $6.00 put options on AMC for $1.70 per share. His outlay was $170,000 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 1,000 of the 05-Mar-21 $3.00 put options on AMC for $0.20 per share, which is an inflow of $20,000. His total outlay for this Bear Put Spread Strategy was $150,000.
AMC – Bear Put Spread Options Strategy
AMC needs to decline to $4.50 for the put option trade to break even – around a 22% return from the current price of $5.80. Then, for every $1 the stock moves below $4.50, our “smart money” trader will make $100,000! It may be noted that the trader’s profit will be limited till the price of $3.00 as he had sold the $3.00 strike price put options.
He seems to be anticipating the underlying stock to decline until $3.00, which is a nearly 48% return from the current price of $5.80.
Trade #3: Trader Just Bet $6,380,800 That General Motors Company (NYSE: GM) Will Have a Significant Move in Either Direction in 11 Months.
On Wednesday, February 10, 2021, a “smart money” trader seems to have bought 3,200 of the 21-Jan-22 $55.00 call options on GM for $9.63 per share. Her outlay was $3,081,600 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 3,200 of the 21-Jan-22 $55.00 put options on GM for $10.31 per share, which is an outlay of $3,299,200. Her total outlay for this Long Straddle Strategy was $6,380,800.
GM – Long Straddle Options Strategy
GM will need to rise to $74.94 for the call option trade to break even — around a 37% return from the current price of $54.88. And then for every $1 the stock rises above $74.94, our “smart money” trader will make $320,000!
GM will need to decline to $35.06 for the put option trade to break even — around a 36% return from the current price of $54.88. And then for every $1 the stock decreases below $35.06, our “smart money” trader will make $320,000!
She seems to be anticipating the underlying stock to have a significant move in either direction within the next 11 months.
Trade #4: Trader Just Made $106,875 Betting That Cleveland-Cliffs Inc. (NYSE: CLF) Will Stay Bearish For The Next 8 Weeks.
On Tuesday, February 9, 2021, a “smart money” trader seems to have bought 2,375 of the 16-Apr-21 $20.00 call options on CLF for $0.73 per share. His outlay was $173,375 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), he also seems to have sold 2,375 of the 16-Apr-21 $18.00 call options on CLF for $1.18 per share, which is an inflow of $280,250. His total inflow for this Bear Call Spread Strategy was $106,875.
CLF- 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. He seems to be anticipating that the price of the stock would not cross above $18.00 until 16-Apr-2021.
Trade #5: Trader Just Bet $1,110,000 That Twitter Inc. (NYSE: TWTR) Will Have a Significant Move in Either Direction in 5 Weeks.
On Wednesday, February 10, 2021, a “smart money” trader seems to have bought 1,000 of the 19-Mar-21 $70.00 call options on TWTR for $3.20 per share. Her outlay was $320,000 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 1,000 of the 19-Mar-21 $70.00 put options on TWTR for $7.90 per share, which is an outlay of $790,000. Her total outlay for this Long Straddle Strategy was $1,110,000.
TWTR – Long Straddle Options Strategy
TWTR will need to rise to $81.10 for the call option trade to break even — around a 20% return from the current price of $67.77. And then for every $1 the stock rises above $81.10, our “smart money” trader will make $100,000!
TWTR will need to decline to $58.90 for the put option trade to break even — around a 13% return from the current price of $67.77. And then for every $1 the stock decreases below $58.90, our “smart money” trader will make $100,000!
She seems to be anticipating the underlying stock to have a significant move in either direction within the next 5 weeks.
Happy Trading!
— Trades of The Day Research Team