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 $322,850 Betting That Roku Inc. (NASDAQ: ROKU) Will Stay Bullish For The Next 12 Weeks.
On Monday, June 21, 2021, a “smart money” trader seems to have bought 587 of the 17-Sep-21 $260.00 put options on ROKU for $3.55 per share. His outlay was $208,385 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 587 of the 17-Sep-21 $300.00 put options on ROKU for $9.05 per share, which is an inflow of $531,235. His total inflow for this Bull Put Spread Strategy was $322,850.
ROKU – 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 $300.00 until 17-Sep-2021. The stock’s previous close was $421.70.
Trade #2: Trader Just Bet $820,000 That Clover Health Investments Corp (NASDAQ: CLOV) Will Have a Significant Move in Either Direction in 8 Weeks.
On Wednesday, June 23, 2021, a “smart money” trader seems to have bought 800 of the 20-Aug-21 $20.00 call options on CLOV for $2.05 per share. Her outlay was $164,000 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 800 of the 20-Aug-21 $20.00 put options on CLOV for $8.20 per share, which is an outlay of $656,000. Her total outlay for this Long Straddle Strategy was $820,000.
CLOV – Long Straddle Options Strategy
CLOV will need to rise to $30.25 for the call option trade to break even — around a 119% return from the current price of $13.83. And then for every $1 the stock rises above $30.25, our “smart money” trader will make $80,000!
CLOV will need to decline to $9.75 for the put option trade to break even — around a 30% return from the current price of $13.83. And then for every $1 the stock decreases below $9.75, our “smart money” trader will make $80,000!
She seems to be anticipating the underlying stock to have a significant move in either direction within the next 8 weeks.
Trade #3: Trader Just Bet $1,559,300 That Devon Energy Corp (NYSE: DVN) Will Rise 38% in 7 Months.
On Monday, June 21, 2021, a “smart money” trader seems to have bought 15,593 of the 21-Jan-22 $35.00 call options on DVN for $2.05 per share. His outlay was $3,196,570 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 15,593 of the 21-Jan-22 $40.00 call options on DVN for $1.05 per share, which is an inflow of $1,637,270. His total outlay for this Bull Call Spread Strategy was $1,559,300.
DVN – Bull Call Spread Options Strategy
DVN needs to rise to $36.00 for the call option trade to break even – a 24% return from the current price of $29.10. Then, for every $1 the stock rises above $36.00, our “smart money” trader will make $1,559,300!
He seems to be anticipating the underlying stock to surge until $40.00, which is a nearly 38% return from the current price of $29.10.
Trade #4: Trader Just Bet $425,000 That Citigroup Inc. (NYSE: C) Will Decline 35% in 7 Months
On Monday, June 21, 2021, a “smart money” trader seems to have bought 2,500 of the 21-Jan-22 $57.50 put options on C for $2.42 per share. Her outlay was $605,000 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), she also seems to have sold 2,500 of the 21-Jan-22 $45.00 put options on C for $0.72 per share, which is an inflow of $180,000. Her total outlay for this Bear Put Spread Strategy was $425,000.
C – Bear Put Spread Options Strategy
C will need to decline to $55.80 for the put option trade to break even – around a 20% return from the current price of $69.65. Then, for every $1 the stock moves below $55.80, our “smart money” trader will make $250,000! It may be noted that the trader’s profit will be limited till the price of $45.00 as she had sold the $45 strike price put options.
She seems to be anticipating the underlying stock to decline until $45.00, which is a nearly 35% return from the current price of $69.65.
Trade #5: Trader Just Bet $1,380,000 That iShares MSCI Japan ETF (NYSE: EWJ) Will Have a Significant Move in Either Direction in 3 Weeks.
On Tuesday, June 22, 2021, a “smart money” trader seems to have bought 30,000 of the 16-Jul-21 $70.00 call options on EWJ for $0.22 per share. His outlay was $660,000 for these options. In what appears to be a Long Strangle Strategy (wherein the investor simultaneously buys an out-of-the-money call and an out-of-the-money put option with the same expiration date), he also seems to have bought 30,000 of the 16-Jul-21 $65.00 put options on EWJ for $0.24 per share, which is an outlay of $720,000. His total outlay for this long strangle strategy was $1,380,000.
EWJ- Long Strangle Options Strategy
EWJ will need to rise to $70.46 for the call option trade to break even — around a 4% return from the current price of $67.52. And then for every $1 the ETF rises above $70.46, our “smart money” trader will make $3,000,000!
EWJ will need to decline to $64.54 for the put option trade to break even — around a 4% return from the current price of $67.52. And then for every $1 the ETF decreases below $64.54, our “smart money” trader will make $3,000,000!
He seems to be anticipating the underlying ETF to have a significant move in either direction within the next 3 weeks.
Happy Trading!
— Trades of The Day Research Team