One of the most interesting “smart money” trades we came across yesterday was APA Corporation (NASDAQ: APA).
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 $1,037,500 that APA Will Continue to Climb in the Next Four DAYS
On Friday, October 8, 2021, a pro trader seems to have bought 2,500 of the October 15, 2021, $20 call options on APA for $4.15 per share. His outlay was $1,037,500.
The trade’s breakeven point was at $24.15, meaning that APA needs to stay above $24.15 for the call option trade to break even. This is near the stock’s previous close of $24.36. And then for every $1 the stock rises above $24.15, our “smart money” trader will make $250,000!
On analyzing the daily chart of APA, the stock seems to have broken out of a double bottom pattern (marked in blue color). This breakout level would now act as a strong support area. The stock is also trading above a gap support area (marked as a pink color dotted line), which would now act as an additional level of support for the stock. All this makes it likely our pro trader is bullish on APA.
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 15, 2021, $20 call options on APA for $4.15 or better.
As always, depending on your risk appetite, do remember to set a stop-loss for the options trade to avoid significant losses.
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