One of the most interesting “smart money” trades we came across yesterday was with Roku Inc. (NASDAQ: ROKU).
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 $1,000,000 Betting that Roku Inc. will Stay Below $350 For the Next One Week
On Friday, September 03, 2021, a pro trader seems to have sold 1,000 of the September 17, 2021, $350 call options on Roku Inc. for $10.00 per share. His inflow was $1,000,000.
ROKU – Options Trade
Roku Inc. will need to stay below $350 in the next week so that the trader can buy back the 17-Sep-21 $350.00 call options for next to nothing. And then our “smart money” trader will get to keep the $1,000,000 he had received when selling the 17-Sep-21 $350.00 call options.
On analyzing the chart of Roku Inc., the stock seems to have broken down from a strong support area (marked as blue color dotted line). It has also formed a bearish engulfing candlestick pattern (marked as a pink color ellipse). All this makes it likely our pro trader is bearish on Roku Inc.
ROKU – 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 September 17, 2021, $350 call options on Roku Inc. for $10.00 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
Magnificent 7 Wipeout: What's Next? [sponsor]The next three months could be very challenging and critically important for anyone with money in the markets. You need a big-picture plan... and you need to take specific actions starting TODAY. Don't get stuck in the "denial" trap so many fall into. 50-year Wall Street veteran Marc Chaikin recently published his full big-picture plan, which lays out – based on more than 100 years of data – exactly what you can expect in the markets this year (and in 2026, too). Click here for Marc's critical new update.
