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 Made $7,250,000 Betting That CBS Corporation Common Stock (NASDAQ: VIAC) Will Stay Bullish For The Next 6 Months.
On Monday, March 15, 2021, a “smart money” trader seems to have bought 10,000 of the 17-Sep-21 $60.00 put options on VIAC for $4.20 per share. Her outlay was $4,200,000 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), she also seems to have sold 10,000 of the 17-Sep-21 $80.00 put options on VIAC for $11.45 per share, which is an inflow of $11,450,000. Her total inflow for this Bull Put Spread Strategy was $7,250,000.
VIAC – Bull Put Spread Options Strategy
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 stay above $80.00 until 17-Sep-2021.
Trade #2: Trader Just Bet $177,080 That SOS Ltd – ADR (NYSE: SOS) Will Rise at Least 148% in 8 Months.
On Monday, March 15, 2021, a “smart money” trader seems to have sold 932 of the 21-Jan-22 $7.50 call options on SOS for $3.80 per share. His inflow was $354,160 for these options. In what appears to be a Call Backspread Strategy (wherein the investor sells one In-the-Money (ITM) or At-the-Money (ATM) call option and simultaneously buys two Out-the-Money (OTM) call options of the same underlying asset with the same expiry), he also seems to have sold two 932 units of 21-Jan-22 $12.50 call options on SOS for $5.70 (=2X2.85) per share, which is an outlay of $531,240. His total outlay for this Call Backspread Strategy was $177,080.
SOS- Bull Call Spread Options Strategy
SOS needs to rise to $19.40 for the call option trade to break even (breakeven price = Long call strikes + Difference between long and short strikes -/+ net premium received or paid) – around a 148% return from the current price of $7.81. Then, for every $1 the stock rises above $19.40, our “smart money” trader will make $93,200!
Trade #3: Trader Just Bet $2,625,000 That iShares 20 Plus Year Treasury Bond ETF (NASDA: TLT) Will Have a Significant Move in Either Direction in 4 Weeks.
On Tuesday, March 16, 2021, a “smart money” trader seems to have bought 5,250 of the 16-Apr-21 $137.00 call options on TLT for $2.44 per share. Her outlay was $1,281,000 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 5,250 of the 16-Apr-21 $137.00 put options on TLT for $2.56 per share, which is an outlay of $1,344,000. Her total outlay for this Long Straddle Strategy was $2,625,000.
TLT- Long Straddle Options Strategy
TLT will need to rise to $142.00 for the call option trade to break even — around a 5% return from the current price of $135.29. And then for every $1 the ETF rises above $142.00, our “smart money” trader will make $525,000!
TLT will need to decline to $132.00 for the put option trade to break even — around a 2.40% return from the current price of $135.29. And then for every $1 the ETF decreases below $132.00, our “smart money” trader will make $525,000!
She seems to be anticipating the underlying ETF to have a significant move in either direction within the next 4 weeks.
Trade #4: Trader Just Made $260,000 Betting That iShares China Large-Cap ETF (NYSE: FXI) Will Stay Bearish For The Next 2 Weeks.
On Wednesday, March 17, 2021, a “smart money” trader seems to have bought 10,000 of the 01-Apr-21 $53.00 call options on FXI for $0.07 per share. His outlay was $70,000 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), he also seems to have sold 10,000 of the 01-Apr-21 $50.00 call options on FXI for $0.33 per share, which is an inflow of $330,000. His total inflow for this Bear Call Spread Strategy was $260,000.
FXI- 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 FXI would not cross above $50.00 until 01-Apr-21.
Trade #5: Trader Just Bet $1,214,000 That United States Oil Fund LP (NYSE: USO) Will Have a Significant Move in Either Direction in 3 Months.
On Wednesday, March 17, 2021, a “smart money” trader seems to have bought 2,000 of the 18-Jun-21 $44.00 call options on USO for $3.04 per share. Her outlay was $608,000 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 2,000 of the 18-Jun-21 $44.00 put options on USO for $3.03 per share, which is an outlay of $606,000. Her total outlay for this Long Straddle Strategy was $1,214,000.
USO- Long Straddle Options Strategy
USO will need to rise to $50.07 for the call option trade to break even — around a 14% return from the current price of $43.82. And then for every $1 the stock rises above $50.07, our “smart money” trader will make $200,000!
USO will need to decline to $37.93 for the put option trade to break even — around a 13% return from the current price of $43.82. And then for every $1 the stock decreases below $37.93, our “smart money” trader will make $200,000!
She seems to be anticipating the underlying stock to have a significant move in either direction within the next three months.
Happy Trading!
— Trades of The Day Research Team
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