One of the most interesting “smart money” trades we came across this past Friday was with NVIDIA (NASDAQ: NVDA).
NVIDIA was one of our Top 10 Stocks to Watch for Possible Breakouts last week, so it was already on our radar before the “smart money” trade came through.
If you’re new here, a “smart money” trade is a relatively large volume option trade most likely made by a pro trader. The idea is to analyze unusual option activity, identify an interesting “smart money” trade, and then make our best guess as to:
- which direction the trader thinks the stock is headed
- how much they think it will rise (or fall), and
- in what time frame this will all happen.
If we like what we see after putting all these pieces together, we can mimic the “smart money” trade (on a smaller scale), and potentially ride alongside our pro trader to profits. With all this in mind…
A Pro Trader Just Bet Over $1 Million that NVDA will Rise at least 8% in the Next 7 Months
On Friday, August 27, 2021, a pro trader seems to have bought 300 of the March 18, 2022 $210 call options on NVDA for $34.40 per share. His outlay was $1,032,000.
NVDA Options Trade
NVDA will need to rise to $244.40 for the call option trade to break even — around an 8% return from the current price of $226.36. And then for every $1 the stock rises above $244.40, our “smart money” trader will make $30,000!
On analyzing the chart of NVDA, the stock seems to have broken out of a flag pattern at around $210. This level would now act as a strong support area, making it likely our pro trader is bullish on NVIDIA.
This lends credence to our conclusion that the pro bought these call options, as opposed to selling them. If you agree, and would like to mimic this trade, here’s how:
Buy to open the March 18, 2022 $210 call options on NVDA for $34.40 or better.
Happy Trading!
— Trades of The Day Research Team
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