Pro Traders are Betting MILLIONS on These Stocks… Unusual Options Activity

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 $1,000,000 That ContextLogic Inc. (NASDAQ: WISH) Will Rise 69% in 5 Weeks.

On Wednesday, July 07, 2021, a “smart money” trader seems to have bought 10,000 of the 13-Aug-21 $11.50 call options on WISH for $1.60 per share. His outlay was $1,600,000 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 10,000 of the 13-Aug-21 $18.50 call options on WISH for $0.60 per share, which is an inflow of $600,000. His total outlay for this Bull Call Spread Strategy was $1,000,000.

WISH needs to rise to $12.50 for the call option trade to break even – a 14% return from the current price of $10.95. Then, for every $1 the stock rises above $12.50, our “smart money” trader will make $1,000,000!

He seems to be anticipating the underlying stock to surge until $18.50, which is a nearly 69% return from the current price of $10.95.

Trade #2: Trader Just Made $654,000 Betting That Alibaba Group Holding Ltd (NYSE: BABA) Will Stay Bearish For The Next 10 Weeks

On Tuesday, July 06, 2021, a “smart money” trader seems to have bought 2,000 of the 17-Sep-21 $250.00 call options on BABA for $2.85 per share. Her outlay was $570,000 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 2,000 of the 17-Sep-21 $230.00 call options on BABA for $6.12 per share, which is an inflow of $1,224,000. Her total inflow for this Bear Call Spread Strategy was $654,000.

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 stock would not cross above $230.00 until 17-Sep-21. BABA’s last close was $208.00.

Trade #3: Trader Just Bet $2,088,240 That Financial Select Sector SPDR Fund (NYSE: XLF) Will Decline 23% in 7 Months

On Tuesday, July 06, 2021, a “smart money” trader seems to have bought 87,010 of the 20-Aug-21 $34.00 put options on XLF for $0.29 per share. His outlay was $2,523,290 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 87,010 of the 20-Aug-21 $28.00 put options on XLF for $0.05 per share, which is an inflow of $435,050. His total outlay for this Bear Put Spread Strategy was $2,088,240.

XLF will need to decline to $33.76 for the put option trade to break even – around a 7% return from the current price of $36.41. Then, for every $1 the ETF moves below $33.76, our “smart money” trader will make $8,701,000! It may be noted that the trader’s profit will be limited till the price of $28.00 as he had sold the $28.00 strike price put options.

He seems to be anticipating the underlying stock to decline until $28.00, which is a nearly 23% return from the current price of $36.41.

Trade #4: This Veteran Trader Just Executed a Complex Options Strategy and Bet $26,600,000 That Trade Desk Inc. (NASDAQ: TTD) Will Stay Bullish For the Next 4 Months.

On Wednesday, July 07, 2020, a seasoned “smart money” trader seems to have sold 40,000 of the 16-Jul-21 $75.00 call options on TTD for $3.68 per share. Her inflow was $14,720,000 for these options. In what appears to be a Long Calendar Spread With Calls Strategy (wherein the investor simultaneously sells and buys a call option with the same strike price, but the call she buys will have a later expiration date than the call she sells), she also seems to have bought 40,000 of the 15-Oct-21 $75.00 call options on TTD for $10.33 per share, which is an outlay of $41,320,000. Her total outlay for this Long Calendar Spread With Call Strategy was $26,600,000.

Note that the Trader is taking advantage of accelerating time decay on the shorter-term call, which means that the strategy is about the time value.

TTD will need to stay above $75 in the next week so that the trader can buy back the 16-Jul-21 $75.00 call options for next to nothing. And then our “smart money” trader will get to keep the $14,720,000 she had received when selling the 16-Jul-21 $75.00 call options.

She could either continue to hold the 15-Oct-21 $75.00 call options until expiry and get unlimited profits in case the stock price increases or cover the 15-Oct-21 $75.00 call options and incur a loss in case the price decreases. However, the maximum loss would be limited to $26,000,000.

Trade #5: Trader Just Made $61,880 Betting That Amazon.com (AMZN) Will Stay Bullish For The Next 2 Weeks.

On Monday, July 06, 2021, a “smart money” trader seems to have bought 442 of the 23-Jul-21 $3535.00 put options on AMZN for $37.92 per share. His outlay was $1,676,064 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 442 of the 23-Jul-21 $3540.00 put options on AMZN for $39.32 per share, which is an inflow of $1,737,944. His total inflow for this Bull Put Spread Strategy was $61,880.

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 $3535.00 until 23-Jul-2021. The stock’s previous close was $3,696.58.

Happy Trading!

— Trades of The Day Research Team

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