One of the most interesting “smart money” trades we came across yesterday was with Visa Inc. (NYSE: V).
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 Made $3,449,600 Betting that Visa Inc. will Stay Below $230 For the Next 11 Weeks
On Thursday, September 02, 2021, a pro trader seems to have sold 4,928 of the November 19, 2021, $230 call options on Visa Inc. for $7.00 per share. His inflow outlay was $3,449,600.
V – Options Trade
Visa Inc. will need to stay below $230 in the next 11 weeks so that the trader can buy back the 19-Nov-21 $230.00 call options for next to nothing. And then our “smart money” trader will get to keep the $3,449,600 he had received when selling the 19-Nov-21 $230.00 call options.
On analyzing the chart of Visa Inc., the stock seems to have broken down from an uptrend channel (marked as blue color lines). It has also closed below a long-term support area (marked as red color dotted line). All this makes it likely our pro trader is bearish on Visa Inc.
V- Daily Chart
This lends credence to our conclusion that the pro sold these call options, as opposed to buying them.
If you agree and would like to mimic this trade, here’s how:
Sell to open the November 19, 2021, $230 call options on Visa Inc. for $7.00 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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