One of the most interesting “smart money” trades we came across yesterday was with Lucid Group, Inc. (NASDAQ: LCID).
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 $1,215,500 that LCID will Rise in the Next 2 Weeks
On Tuesday, September 21, 2021, a pro trader seems to have bought 3,740 of the October 01, 2021, $24 call options on LCID for $3.25 per share. His outlay was $1,215,500.
LCID – Option Trade
The trade’s breakeven point is at $27.25, meaning that LCID needs to rise to $27.25 for the call option trade to break even. This is a nearly 2% return from the stock’s previous close of $26.81. And then for every $1 the stock rises above $27.25, our “smart money” trader will make $374,000!
On analyzing the chart of LCID, the stock seems to be trading above gap support. This support area is marked as a pink color dotted line. LCID’s price is also above the 50-day and 200-day moving average, indicating that the bulls are firmly in control. All this makes it likely our pro trader is bullish on Lucid Group, Inc.
LCID – 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 October 01, 2021, $24 call options on LCID for $3.25 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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