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 $1,331,000 That Moderna Inc. (NASDAQ: MRNA) Will Rise 26% in 6 Months.
On Monday, July 19, 2021, a “smart money” trader seems to have bought 550 of the 15-Jan-22 $310.00 call options on MRNA for $47.39 per share. His outlay was $2,606,450 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 550 of the 15-Jan-22 $400.00 call options on MRNA for $23.19 per share, which is an inflow of $1,275,450. Her total outlay for this Bull Call Spread Strategy was $1,331,000.
MRNA – Bull Call Spread Options Strategy
MRNA needs to rise to $334.20 for the call option trade to break even – around a 4% return from the current price of $321.11. Then, for every $1 the stock rises above $334.20, our “smart money” trader will make $55,000!
He seems to be anticipating the underlying stock to surge until $400, which is a nearly 26% return from the current price of $321.11.
Trade #2: Trader Just Made $43,152 Betting That Barclays iPath Series B S&P 500 VIX Short-Term Futures ETN (BATS: VXX) Will Stay Bearish For The Next 2 Weeks.
On Monday, July 19, 2021, a “smart money” trader seems to have bought 1,392 of the 06-Aug-21 $34.00 call options on VXX for $4.04 per share. Her outlay was $562,368 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 1,392 of the 06-Aug-21 $33.00 call options on VXX for $4.35 per share, which is an inflow of $605,520. Her total inflow for this Bear Call Spread Strategy was $43,152.
VXX – 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 underlying ETF would not cross above $33 until 06-Aug-2021.
Trade #3: Trader Just Bet $3,600,000 That iShares iBoxx $ High Yield Corporate Bond ETF (NYSE: HYG) Will Decline 10% in 3 Months.
On Monday, July 19, 2021, a “smart money” trader seems to have bought 60,000 of the 15-Oct-21 $85.00 put options on HYG for $0.97 per share. His outlay was $5,820,000 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 60,000 of the 15-Oct-21 $79.00 put options on HYG for $0.37 per share, which is an inflow of $2,220,000. His total outlay for this Bear Put Spread Strategy was $3,600,000.
HYG – Bear Put Spread Options Strategy
HYG needs to decline to $84.40 for the put option trade to break even — around a 4% return from the current price of $87.73. Then, for every $1 the stock moves below $84.40, our “smart money” trader will make $6,000,000! It may be noted that the trader’s profit will be limited till the price of $79.00 as he had sold the $79.00 strike price put options.
He seems to be anticipating the underlying ETF to decline until $79.00, which is a nearly 10% return from the current price of $87.73.
Trade #4: Trader Just Bet $15,288,000 That NVIDIA Corporation (NASDAQ: NVDA) Will Have a Significant Move in Either Direction in 5 Weeks.
On Tuesday, July 20, 2021, a “smart money” trader seems to have bought 7,800 of the 20-Aug-21 $187.50 call options on NVDA for $9.45 per share. Her outlay was $7,371,000 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 7,800 of the 20-Aug-21 $187.50 put options on NVDA for $10.15 per share, which is an outlay of $7,917,000. Her total outlay for this Long Straddle Strategy was $15,288,000.
NVDA – Long Straddle Options Strategy
NVDA will need to rise to $207.10 for the call option trade to break even — around a 7% return from the current price of $194.10. And then for every $1 the stock rises above $207.10, our “smart money” trader will make $780,000!
NVDA will need to decline to $167.90 for the put option trade to break even — around a 14% return from the current price of $194.10. And then for every $1 the stock decreases below $167.90, our “smart money” trader will make $780,000!
He seems to be anticipating the underlying stock to have a significant move in either direction within the next 5 weeks.
Trade #5: Trader Just Bet $4,446,000 That iShares Russell 2000 ETF (NYSE: IWM) Will Decline 19% in 10 Weeks.
On Monday, July 19, 2021, a “smart money” trader seems to have bought 9,000 of the 30-Sep-21 $205.00 put options on IWM for $7.08 per share. His outlay was $6,372,000 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 9,000 of the 30-Sep-21 $180.00 put options on IWM for $2.14 per share, which is an inflow of $1,926,000. His total outlay for this Bear Put Spread Strategy was $4,446,000.
IWM – Bear Put Spread Options Strategy
IWM needs to decline to $200.06 for the put option trade to break even — around a 10% return from the current price of $222.06. Then, for every $1 the stock moves below $200.06, our “smart money” trader will make $900,000! It may be noted that the trader’s profit will be limited till the price of $180.00 as he had sold the $180.00 strike price put options.
He seems to be anticipating the underlying stock to decline until $180.00, which is a nearly 19% return from the current price of $222.06.
Happy Trading!
— Trades of The Day Research Team
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