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 $490,000 That Jumia Technologies AG – ADR (NYSE: JMIA) Will Decline 31% in 1 Week
On Tuesday, May 11, 2021, a “smart money” trader seems to have bought 5,000 of the 21-May-21 $20.00 put options on JMIA for $1.47 per share. His outlay was $735,000 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 5,000 of the 21-May-21 $16.00 put options on JMIA for $0.49 per share, which is an inflow of $245,000. His total outlay for this Bear Put Spread Strategy was $490,000.
JMIA – Bear Put Spread Options Strategy
JMIA needs to decline to $19.02 for the put option trade to break even – around an 18% return from the current price of $23.10. Then, for every $1 the stock moves below $19.02, our “smart money” trader will make $500,000! It may be noted that the trader’s profit will be limited till the price of $16.00 as he had sold the $16 strike price put options.
He seems to be anticipating the underlying stock to decline until $16.00, which is a nearly 31% return from the current price of $23.10.
Trade #2: Trader Just Bet $11,101,325 That ARK Innovation ETF (NYSE: ARKK) Will Have a Significant Move in Either Direction in 5 Weeks.
On Monday, May 10, 2021, a “smart money” trader seems to have bought 4,175 of the 18-Jun-21 $130.00 call options on ARKK for $0.47 per share. Her outlay was $196,225 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 4,175 of the 18-Jun-21 $130.00 put options on ARKK for $26.12 per share, which is an outlay of $10,905,100. Her total outlay for this Long Straddle Strategy was $11,101,325.
ARKK – Long Straddle Options Strategy
ARKK will need to rise to $156.59 for the call option trade to break even — around a 53% return from the current price of $102.16. And then for every $1 the ETF rises above $156.59, our “smart money” trader will make $417,500!
ARKK needed to decline to $103.41 for the put option trade to break even. And then for every $1 the ETF decreases below $103.41, our “smart money” trader will make $417,500!
She seems to be anticipating the underlying stock to have a significant move in either direction within the next 5 weeks.
Trade #3: Trader Just Bet $325,000 That Direxion Daily Semiconductor Bear 3X (NYSE: SOXS) Will Rise 33% in 1 Week.
On Wednesday, May 12, 2021, a “smart money” trader seems to have bought 13,000 of the 21-May-21 $13.00 call options on SOXS for $0.55 per share. His outlay was $715,000 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 13,000 of the 21-May-21 $16.00 call options on SOXS for $0.30 per share, which is an inflow of $390,000. His total outlay for this Bull Call Spread Strategy was $325,000.
SOXS – Bull Call Spread Options Strategy
SOXS needed to rise to $13.25 for the call option trade to break even – a 10% return from the current price of $12.01. Then, for every $1 the stock rose above $13.25, our “smart money” trader made $1.300,000!
He seems to be anticipating the underlying stock to surge until $16.00, which is a nearly 33% return from the current price of $12.01.
Trade #4: Trader Just Made $425,000 Betting That iShares MSCI Japan ETF (NYSE: EWJ) Will Stay Bearish For The Next 5 Weeks
On Wednesday, May 12, 2021, a “smart money” trader seems to have bought 25,000 of the 18-Jun-21 $70.00 call options on EWJ for $0.23 per share. Her outlay was $575,000 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 25,000 of the 18-Jun-21 $69.00 call options on EWJ for $0.40 per share, which is an inflow of $1,000,000. Her total inflow for this Bear Call Spread Strategy was $425,000.
EWJ – 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 ETF would not cross above $69.00 until 18-Jun-21. EWJ’s last close was $65.43.
Trade #5: Trader Just Bet $765,400 That SPDR S&P Regional Banking ETF (NYSE: KRE) Will Rise 9% in 1 Week.
On Wednesday, May 12, 2021, a “smart money” trader seems to have bought 8,600 of the 21-May-21 $69.50 call options on KRE for $1.01 per share. His outlay was $868,600 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 8,600 of the 21-May-21 $73.50 call options on KRE for $0.12 per share, which is an inflow of $103,200. His total outlay for this Bull Call Spread Strategy was $765,400.
KRE – Bull Call Spread Options Strategy
KRE needs to rise to $70.39 for the call option trade to break even – a 4% return from the current price of $67.70. Then, for every $1 the stock rose above $70.39, our “smart money” trader would make $860,000!
He seems to be anticipating the underlying stock to surge until $73.50, which is a nearly 9% return from the current price of $67.70.
Happy Trading!
— Trades of The Day Research Team
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