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 $1,785,000 That Romeo Power Inc. (NYSE: RMO) Will Have a Significant Move in Either Direction in 6 Weeks
On Wednesday, April 7, 2021, a “smart money” trader seems to have bought 3,000 of the 21-May-21 $15.00 call options on RMO for $0.75 per share. Her outlay was $225,000 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 3,000 of the 21-May-21 $15.00 put options on RMO for $5.20 per share, which is an outlay of $1,560,000. Her total outlay for this Long Straddle Strategy was $1,785,000.
RMO – Long Straddle Options Strategy
RMO will need to rise to $20.95 for the call option trade to break even — around a 100% return from the current price of $10.45. And then for every $1 the stock rises above $20.95, our “smart money” trader will make $300,000!
RMO will need to decline to $9.05 for the put option trade to break even— around a 13% return from the current price of $10.45. And then for every $1 the stock decreases below $9.05, our “smart money” trader will make $300,000!
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 Made $624,000 Betting That Applied Materials, Inc. (NASDAQ: AMAT) Will Stay Bearish For The Next 1 Week.
On Monday, April 5, 2021, a “smart money” trader seems to have bought 2,000 of the 16-Apr-21 $157.50 call options on AMAT for $1.43 per share. His outlay was $286,000 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 2,000 of the 16-Apr-21 $145.00 call options on AMAT for $4.55 per share, which is an inflow of $910,000. His total inflow for this Bear Call Spread Strategy was $624,000.
AMAT – 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 AMAT would not cross above $145.00 until 16-Apr-21.
Trade #3: Trader Just Made $51,700 Betting That Alphabet Inc Class A (NASDAQ: GOOGL) Will Stay Bullish For The Next 1 Week.
On Monday, April 5, 2021, a “smart money” trader seems to have bought 1,034 of the 16-Apr-21 $2045.00 put options on GOOGL for $5.95 per share. His outlay was $615,230 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 1,034 of the 16-Apr-21 $2050.00 put options on GOOGL for $6.45 per share, which is an inflow of $666,930. His total inflow for this Bull Put Spread Strategy was $51,700.
GOOGL – 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 $2045.00 until 16-Jul-2021.
Trade #4: Trader Just Bet $660,000 That Gap Inc. (NYSE: GPS) Will Rise 6% in 1 Week
On Monday, April 5, 2021, a “smart money” trader seems to have bought 7,500 of the 16-Apr-21 $29.50 call options on GPS for $1.00 per share. Her outlay was $750,000 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 7,500 of the 16-Apr-21 $35.50 call options on GPS for $0.12 per share, which is an inflow of $90,000. Her total outlay for this Bull Call Spread Strategy was $660,000.
GPS – Bull Call Spread Options Strategy
GPS needed to rise to $30.38 for the call option trade to break even. Then, for every $1 the stock rises above $30.38, our “smart money” trader will make $750,000!
She seems to be anticipating the underlying stock to surge until $32.50, which is a nearly 6% return from the current price of $30.70.
Trade #5: Trader Just Bet $1,134,000 That AT&T Inc. (NYSE: T) Will Have a Significant Move in Either Direction in ONE Week.
On Wednesday, April 7, 2021, a “smart money” trader seems to have bought 9,000 of the 16-Apr-21 $31.50 call options on T for $0.04 per share. Her outlay was $36,000 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 9,000 of the 16-Apr-21 $31.50 put options on T for $1.22 per share, which is an outlay of $1,098,000. Her total outlay for this Long Straddle Strategy was $1,134,000.
T – Long Straddle Options Strategy
T will need to rise to $32.76 for the call option trade to break even — around a 6% return from the current price of $30.93. And then for every $1 the stock rises above $32.76, our “smart money” trader will make $900,000!
T will need to decline to $30.24 for the put option trade to break even — around a 2% return from the current price of $30.93. And then for every $1 the stock decreases below $30.24, our “smart money” trader will make $900,000!
She seems to be anticipating the underlying stock to have a significant move in either direction within the next week.
Happy Trading!
— Trades of The Day Research Team