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 $20,844,000 That Discovery, Inc. (NASDAQ: DISCA) Will Have a Significant Move in Either Direction in 7 Weeks.
On Monday, March 29, 2021, a “smart money” trader seems to have bought 6,000 of the 21-May-21 $75.00 call options on DISCA for $0.62 per share. Her outlay was $372,000 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 21-May-21 $75.00 put options on DISCA for $34.12 per share, which is an outlay of $20,472,000. Her total outlay for this Long Straddle Strategy was $20,844,000.
DISCA – Long Straddle Options Strategy
DISCA will need to rise to $109.74 for the call option trade to break even — around a 153% return from the current price of $43.46. And then for every $1 the stock rises above $109.74, our “smart money” trader will make $600,000!
DISCA will need to decline to $40.26 for the put option trade to break even— around a 7% return from the current price of $43.46. And then for every $1 the stock decreases below $40.26, 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 7 weeks.
Trade #2: Trader Just Made $256,500 Betting That CBS Corporation Common Stock (NASDAQ: VIAC) Will Stay Bearish For The Next 11 Weeks.
On Tuesday, March 30, 2021, a “smart money” trader seems to have bought 2,700 of the 18-Jun-21 $75.00 call options on VIAC for $0.99 per share. His outlay was $267,300 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 2,700 of the 18-Jun-21 $65.00 call options on VIAC for $1.94 per share, which is an inflow of $523,800. His total inflow for this Bear Call Spread Strategy was $256,500.
VIAC – 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 VIAC would not cross above $65.00 until 18-Jun-21.
Trade #3: Trader Just Bet $11,280,600 That Baidu Inc ADR Class A (NASDAQ: BIDU) Will Have a Significant Move in Either Direction in 7 Weeks.
On Tuesday, March 30, 2021, a “smart money” trader seems to have bought 2,700 of the 21-May-21 $230.00 call options on BIDU for $15.64 per share. Her outlay was $4,222,800 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 2,700 of the 21-May-21 $230.00 put options on BIDU for $26.14 per share, which is an outlay of $7,057,800. Her total outlay for this Long Straddle Strategy was $11,280,600.
BIDU – Long Straddle Options Strategy
BIDU will need to rise to $271.78 for the call option trade to break even — around a 25% return from the current price of $217.55. And then for every $1 the stock rises above $271.78, our “smart money” trader will make $270,000!
BIDU will need to decline to $188.22 for the put option trade to break even — around a 14% return from the current price of $217.55. And then for every $1 the stock decreases below $188.22, our “smart money” trader will make $270,000!
She seems to be anticipating the underlying stock to have a significant move in either direction within the next 7 weeks.
Trade #4: Trader Just Made $48,000 Betting That Tencent Music Entertainment Group – ADR (NYSE: TME) Will Stay Bullish For The Next 16 Weeks.
On Tuesday, March 30, 2021, a “smart money” trader seems to have bought 1,200 of the 16-Jul-21 $19.00 put options on TME for $1.67 per share. His outlay was $200,400 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 1,200 of the 16-Jul-21 $20.00 put options on TME for $2.07 per share, which is an inflow of $248,400. His total inflow for this Bull Put Spread Strategy was $48,000.
TME – 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 $20.00 until 16-Jul-2021.
Trade #5: Trader Just Bet $150,000 That Calumet Specialty Products Partners, L.P (NASDAQ: CLMT) Will Rise 14% in 7 Weeks.
On Wednesday, March 31, 2021, a “smart money” trader seems to have bought 5,000 of the 21-May-21 $6.00 call options on CLMT for $0.55 per share. Her outlay was $275,000 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 21-May-21 $7.00 call options on CLMT for $0.25 per share, which is an inflow of $125,000. Her total outlay for this Bull Call Spread Strategy was $150,000.
CLMT – Bull Call Spread Options Strategy
CLMT will need to rise to $6.30 for the call option trade to break even — around a 3% return from the current price of $6.10. Then, for every $1 the stock rises above $6.30, our “smart money” trader will make $500,000!
She seems to be anticipating the underlying stock to surge until $7.00, which is a nearly 15% return from the current price of $6.10.
Happy Trading!
— Trades of The Day Research Team