One of the most interesting “smart money” trades we came across yesterday was with Goldman Sachs Group Inc. (NYSE: GS).
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 options 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 GS will Rise at least 2% in the Next 6 Weeks
On Monday, August 31, 2021, a pro trader seems to have bought 357 of the October 15, 2021 $385 call options on GS for $38.30 per share. Her outlay was $ 1,367,310.
The trade’s breakeven point is at $423.30, meaning that GS will need to rise to $423.30 for the call option trade to break even. This is around a 2% return from the current price of $413.60. And then for every $1 the stock rises above $423.30, our “smart money” trader will make $35,700!
On analyzing the chart of GS, the stock seems to have broken out of a double bottom pattern at around $385. This level would now act as a strong support area. There is also an additional support area near $392. All this makes it likely our pro trader is bullish on Goldman Sachs Group Inc.
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 October 15, 2021 $385 call options on GS for $38.30 or better.
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