One of the most interesting “smart money” trades we came across yesterday was with Xilinx, Inc. (NASDAQ: XLNX).
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 $6,330,000 that XLNX Will Continue to Climb in the Next 12 Weeks
On Monday, October 18, 2021, a pro trader seems to have bought 3,000 of the January 21, 2022, $160 call options on XLNX for $21.10 per share. Her outlay was $6,330,000.
XLNX – Option Trade
The trade’s breakeven point is at $181.10, meaning that XLNX needs to rise to $181.10 for the call option trade to break even. This is a nearly 6% upside from the stock’s previous close of $170.39. And then for every $1 the stock rises above $181.10, our “smart money” trader will make $300,000!
On analyzing the daily chart of XLNX, the stock seems to have broken out of a flag pattern (marked as blue color lines). This breakout level, which is near $160, would now act as a strong support area. This makes it likely our pro trader is bullish on XLNX.
XLNX – 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 January 21, 2022, $160 call options on XLNX for $21.10 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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