Option Trade of the Day: SPDR S&P 500 Trust ETF (SPY)

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One of the most interesting “smart money” trades we came across yesterday was with SPDR S&P 500 ETF Trust (NYSE: SPY).

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 Made $3,237,000 Betting that SPY will Stay Below $441 For the Next 2 Weeks

On Monday, September 20, 2021, a pro trader seems to have sold 13,000 of the October 01, 2021, $441 call options on SPY for $2.49 per share. Her inflow was $3,237,000. 

SPY – Option Trade

SPY will need to stay below $441 in the next 2 weeks so that the trader can buy back the 01-Oct-21 $441.00 call options for next to nothing. And then our “smart money” trader will get to keep the $3,237,000 she had received when selling the 01-Oct-21 $441.00 call options.

On analyzing the chart of SPY Inc., the stock seems to have broken down from the prevailing uptrend (marked as a pink color line). It has also closed below the 50-day SMA (marked in blue color in the chart). All this makes it likely our pro trader is bearish on SPY Inc.

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SPY – 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 October 01, 2021, $441 call options on SPY for $2.49 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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