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 $4,829,400 That iShares MSCI EAFE ETF (NYSE: EFA) Will Rise 5% in 11 Weeks.
On Wednesday, June 30, 2021, a “smart money” trader seems to have bought 32,196 of the 17-Sep-21 $79.00 call options on EFA for $1.85 per share. His outlay was $5,956,260 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 32,196 of the 17-Sep-21 $83.00 call options on EFA for $0.35 per share, which is an inflow of $1,126,860. His total outlay for this Bull Call Spread Strategy was $4,829,400.
EFA – Bull Call Spread Options Strategy
EFA needs to rise to $80.50 for the call option trade to break even – a 2% return from the current price of $78.88. Then, for every $1 the ETF rises above $80.50, our “smart money” trader will make $3,219,600!
He seems to be anticipating the underlying ETF to surge until $83.00, which is a nearly 5% return from the current price of $78.88.
Trade #2: Trader Just Bet $1,224,000 That Advanced Micro Devices, Inc. (NASDAQ: AMD) Will Decline 31% in 7 Months
On Wednesday, June 30, 2021, a “smart money” trader seems to have bought 1,600 of the 21-Jan-22 $90.00 put options on AMD for $9.15 per share. Her outlay was $1,464,000 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 1,600 of the 21-Jan-22 $65.00 put options on AMD for $1.50 per share, which is an inflow of $240,000. Her total outlay for this Bear Put Spread Strategy was $1,224,000.
AMD – Bear Put Spread Options Strategy
AMD will need to decline to $82.35 for the put option trade to break even – around a 12% return from the current price of $93.93. Then, for every $1 the stock moves below $82.35, our “smart money” trader will make $160,000! It may be noted that the trader’s profit will be limited till the price of $65.00 as she had sold the $65 strike price put options.
She seems to be anticipating the underlying stock to decline until $65.00, which is a nearly 31% return from the current price of $93.93.
Trade #3: Trader Just Bet $1,008,000 That Alibaba Group Holding Ltd – ADR (NYSE: BABA) Will Rise 37% in 4 Months.
On Monday, June 28, 2021, a “smart money” trader seems to have bought 1,400 of the 15-Oct-21 $255.00 call options on BABA for $7.20 per share. His outlay was $1,008,000 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 1,400 of the 15-Oct-21 $310.00 call options on BABA for $1.65 per share, which is an inflow of $231,000. His total outlay for this Bull Call Spread Strategy was $1,008,000.
BABA – Bull Call Spread Options Strategy
BABA needs to rise to $260.55 for the call option trade to break even – a 15% return from the current price of $226.78. Then, for every $1 the stock rises above $260.55, our “smart money” trader will make $140,000!
He seems to be anticipating the underlying stock to surge until $310.00, which is a nearly 37% return from the current price of $226.78.
Trade #4: Trader Just Bet $19,071,380 That SoFi Technologies Inc. (NASDAQ: SOFI) Will Have a Significant Move in Either Direction in 2 Weeks.
On Tuesday, June 29, 2021, a “smart money” trader seems to have bought 6,020 of the 16-Jul-21 $50.00 call options on SOFI for $0.19 per share. Her outlay was $114,380 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 6,020 of the 16-Jul-21 $50.00 put options on SOFI for $31.49 per share, which is an outlay of $18,957,000. Her total outlay for this Long Straddle Strategy was $19,071,380.
SOFI – Long Straddle Options Strategy
SOFI will need to rise to $81.68 for the call option trade to break even — around a 326% return from the current price of $19.17. And then for every $1 the stock rises above $81.68, our “smart money” trader will make $602,000!
SOFI will need to decline to $18.32 for the put option trade to break even — around a 4% return from the current price of $19.17. And then for every $1 the stock decreases below $18.32, our “smart money” trader will make $602,000!
She seems to be anticipating the underlying stock to have a significant move in either direction within the next 2 weeks.
Trade #5: Trader Just Bet $5,600,000 That KraneShares CSI China Internet ETF (NYSE: KWEB) Will Rise 20% in 7 Weeks.
On Tuesday, June 29, 2021, a “smart money” trader seems to have bought 40,000 of the 20-Aug-22 $74.00 call options on KWEB for $1.77 per share. His outlay was $7,080,000 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 40,000 of the 20-Aug-22 $84.00 call options on KWEB for $0.37 per share, which is an inflow of $1,480,000. His total outlay for this Bull Call Spread Strategy was $5,600,000.
KWEB – Bull Call Spread Options Strategy
KWEB needs to rise to $75.40 for the call option trade to break even – an 8% return from the current price of $69.78. Then, for every $1 the ETF rises above $75.40, our “smart money” trader will make $4,000,000!
He seems to be anticipating the underlying ETF to surge until $84.00, which is a nearly 20% return from the current price of $69.78.
Happy Trading!
— Trades of The Day Research Team
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