One of the most interesting “smart money” trades we came across yesterday was with Paypal Holdings Inc. (NASDAQ: PYPL).
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 $2,381,595 that PYPL will Rise at Least 16% in the Next 16 Months
On Tuesday, August 31, 2021, a pro trader seems to have bought 537 of the January 20, 2023, $290 call options on PYPL for $44.35 per share. His outlay was $2,381,595.
PYPL Options Trade
The trade’s breakeven point is at $334.35, meaning that PYPL will need to rise to $334.35 for the call option trade to break even. This is around a 16% return from the current price of $288.66. And then for every $1 the stock rises above $334.35, our “smart money” trader will make $53,700!
On analyzing the chart of PYPL, the stock seems to be on a steady uptrend. PYPL had taken support at the uptrend line multiple times before surging higher. All this makes it likely our pro trader is bullish on Paypal Holdings Inc.
PYPL – Daily Chart
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 January 20, 2023, $290 call options on PYPL for $44.35 or better.
As always, depending on your risk appetite, do remember to set a stop-loss for the options trade to avoid significant losses.
Happy Trading!
— Trades of The Day Research Team
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