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 $3,822,000 Betting That iShares China Large-Cap ETF (NYSE: FXI) Will Stay Bullish For The Next one Week.
On Tuesday, July 27, 2021, a “smart money” trader seems to have bought 78,000 of the 06-Aug-21 $34.00 put options on FXI for $0.36 per share. His outlay was $2,808,000 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 78,000 of the 06-Aug-21 $37.00 put options on FXI for $0.85 per share, which is an inflow of $6,630,000. His total inflow for this Bull Put Spread Strategy was $3,822,000.
FXI – 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 ETF would stay above $34.00 until 06-Aug-2021. The ETF’s previous close was $41.52.
Trade #2: Trader Just Bet $1,081,000 That JD.Com Inc. (NASDAQ: JD) Will Rise 7% in 7 Weeks.
On Monday, July 26, 2021, a “smart money” trader seems to have bought 5,875 of the 17-Sep-21 $70.00 call options on JD for $3.90 per share. Her outlay was $2,291,250 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), she also seems to have sold 5,875 of the 17-Sep-22 $75.00 call options on JD for $2.06 per share, which is an inflow of $1,210,250. Her total outlay for this Bull Call Spread Strategy was $1,081,000.
JD – Bull Call Spread Options Strategy
JD needs to rise to $71.84 for the call option trade to break even – around a 2% return from the current price of $70.28. Then, for every $1 the stock rises above $71.84, our “smart money” trader will make $587,500!
She seems to be anticipating the underlying stock to surge until $75.00, which is a nearly 7% return from the current price of $70.28.
Trade #3: Trader Just Made $1,038,600 Betting That iShares MSCI Emerging Markets ETF (NYSE: EEM) Will Stay Bullish For The Next 2 Weeks.
On Tuesday, July 27, 2021, a “smart money” trader seems to have bought 20,772 of the 13-Aug-21 $45.00 put options on EEM for $0.20 per share. His outlay was $415,440 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 20,772 of the 13-Aug-21 $49.00 put options on EEM for $0.70 per share, which is an inflow of $1,454,040. His total inflow for this Bull Put Spread Strategy was $1,038,600.
EEM – 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 ETF would stay above $45.00 until 13-Aug-2021. The ETF’s previous close was $51.84.
Trade #4: Trader Just Bet $19,140,000 That Alibaba Group Holding Ltd – ADR (NYSE: BABA) Will Have a Significant Move in Either Direction in 7 Weeks.
On Tuesday, July 27, 2021, a “smart money” trader seems to have bought 3,300 of the 17-Sep-21 $240 call options on BABA for $1.20 per share. Her outlay was $396,000 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 3,300 of the 17-Sep-21 $240 put options on BABA for $56.80 per share, which is an outlay of $18,744,000. Her total outlay for this Long Straddle Strategy was $19,140,000.
BABA – Long Straddle Options Strategy
BABA will need to rise to $298 for the call option trade to break even — around a 52% return from the current price of $196.01. And then for every $1 the stock rises above $298, our “smart money” trader will make $330,000!
BABA will need to decline to $182 for the put option trade to break even — around a 7% return from the current price of $196.01. And then for every $1 the stock decreases below $182, our “smart money” trader will make $330,000!
She seems to be anticipating the underlying stock to have a significant move in either direction within the next 7 weeks.
Trade #5: Trader Just Bet $2,550,000 That Moderna Inc. (NASDAQ: MRNA) Will Decline 50% in 17 Months.
On Monday, July 26, 2021, a “smart money” trader seems to have bought 500 of the 20-Jan-23 $300.00 put options on MRNA for $66.65 per share. His outlay was $3,332,500 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 500 of the 20-Jan-23 $175.00 put options on MRNA for $15.65 per share, which is an inflow of $782,500. His total outlay for this Bear Put Spread Strategy was $2,550,000.
MRNA – Bear Put Spread Options Strategy
MRNA needs to decline to $249.00 for the put option trade to break even — around a 29% return from the current price of $349.32. Then, for every $1 the stock moves below $249.00, our “smart money” trader will make $900,000! It may be noted that the trader’s profit will be limited till the price of $175.00 as he had sold the $175.00 strike price put options.
He seems to be anticipating the underlying stock to decline until $175.00, which is a nearly 50% return from the current price of $349.32.
Happy Trading!
— Trades of The Day Research Team
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