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 $12,240,000 That Virgin Galactic Holdings Inc. (NYSE: SPCE) Will Have a Significant Move in Either Direction in 8 Months.
On Tuesday, May 25, 2021, a “smart money” trader seems to have bought 6,000 of the 21-Jan-22 $35.00 call options on SPCE for $4.80 per share. Her outlay was $2,880,000 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-Jan-22 $35.00 put options on SPCE for $15.60 per share, which is an outlay of $9,360,000. Her total outlay for this Long Straddle Strategy was $12,240,000.
SPCE – Long Straddle Options Strategy
SPCE will need to rise to $55.40 for the call option trade to break even — around a 105% return from the current price of $27.00. And then for every $1 the stock rises above $55.40, our “smart money” trader will make $600,000!
SPCE will need to decline to $14.60 for the put option trade to break even — around a 46% return from the current price of $27.00. And then for every $1 the stock decreases below $14.60, 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 8 months.
Trade #2: Trader Just Made $510,000 Betting That TAL Will Stay Bullish For The Next 3 Weeks.
On Monday, May 24, 2021, a “smart money” trader seems to have bought 3,000 of the 18-Jun-21 $30.00 put options on TAL for $1.80 per share. His outlay was $540,000 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), he also seems to have sold 3,000 of the 18-Jun-21 $35.00 put options on TAL for $3.50 per share, which is an inflow of $1,050,000. His total inflow for this Bull Put Spread Strategy was $510,000.
TAL – 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 stocks would stay above $35.00 until 18-Jun-2021. TAL’s last close was $39.47.
Trade #3: Trader Just Bet $1,689,000 That Petroleo Brasileiro (NYSE: PBR) Will Have a Significant Move in Either Direction in 7 Weeks.
On Tuesday, May 25, 2021, a “smart money” trader seems to have bought 3,000 of the 16-Jul-21 $15.00 call options on PBR for $0.03 per share. Her outlay was $9,000 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 16-Jul-21 $15.00 put options on PBR for $5.60 per share, which is an outlay of $1,680,000. Her total outlay for this Long Straddle Strategy was $1,689,000.
PBR – Long Straddle Options Strategy
PBR will need to rise to $20.63 for the call option trade to break even — around a 116% return from the current price of $9.55. And then for every $1 the stock rises above $20.63, our “smart money” trader will make $300,000!
PBR will need to decline to $9.37 for the put option trade to break even — around a 2% return from the current price of $9.55. And then for every $1 the stock decreases below $9.37, 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 7 weeks.
Trade #4: Trader Just Made $768,000 Betting That Roblox Corp (NYSE: RBLX) Will Stay Bearish For The Next 3 Weeks
On Wednesday, May 26, 2021, a “smart money” trader seems to have bought 4,000 of the 18-Jun-21 $120.00 call options on RBLX for $1.83 per share. His outlay was $732,000 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 4,000 of the 18-Jun-21 $105.00 call options on RBLX for $3.75 per share, which is an inflow of $1,500,000. His total inflow for this Bear Call Spread Strategy was $768,000.
RBLX – 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 $105.00 until 18-Jun-21. RBLX’s last close was $89.71.
Trade #5: Trader Just Bet $15,600,000 That Ford Motor Company (NYSE: F) Will Have a Significant Move in Either Direction in 12 Weeks.
On Wednesday, May 26, 2021, a “smart money” trader seems to have bought 65,000 of the 20-Aug-21 $14.00 call options on F for $1.08 per share. Her outlay was $7,020,000 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 65,000 of the 20-Aug-21 $14.00 put options on F for $1.32 per share, which is an outlay of $8,580,000. Her total outlay for this Long Straddle Strategy was $15,600,000.
F – Long Straddle Options Strategy
F will need to rise to $16.40 for the call option trade to break even — around an 18% return from the current price of $13.90. And then for every $1 the stock rises above $16.40, our “smart money” trader will make $6,500,000!
F will need to decline to $11.60 for the put option trade to break even — around a 17% return from the current price of $13.90. And then for every $1 the stock decreases below $11.60, our “smart money” trader will make $6,500,000!
She seems to be anticipating the underlying stock to have a significant move in either direction within the next 12 weeks.
Happy Trading!
— Trades of The Day Research Team
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