Option Trade of the Day: Affirm Holdings (NASDAQ: AFRM)

One of the most interesting “smart money” trades we came across yesterday was with Affirm Holdings Inc. (NASDAQ: AFRM).

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:

  1. Which direction the trader thinks the stock is headed
  2. How much they think it will rise (or fall), and
  3. 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 $5,004,000 that AFRM will Rise in the Next 9 Weeks

On Friday, September 10, 2021, a pro trader seems to have bought 3,600 of the November 19, 2021, $110 call options on AFRM for $13.90 per share. His outlay was $5,004,000. 

AFRM – Options Trade

The trade’s breakeven point is at $123.90, meaning that AFRM will need to rise to $123.90 for the call option trade to break even. This is near the current stock price of $123.70. And then for every $1 the stock rises above $123.90, our “smart money” trader will make $360,000!

On analyzing the chart of AFRM, the stock seems to have broken out of a flag pattern (marked as blue color lines) with a very high volume. The stock had also formed gap support at $110.00, which would now act as a strong support area. All this makes it likely our pro trader is bullish on Affirm Holdings Inc.

AFRM – 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 November 19, 2021, $110 call options on AFRM for $13.90 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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