One of the most interesting “smart money” trades we came across yesterday was with Bakkt Holdings Inc. (NYSE: BKKT)
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 $17,608,800 that BKKT Will Stay Bullish For the Next 7 Weeks
On Monday, October 25, 2021, a pro trader seems to have bought 7,590 of the December 17, 2021, $2.00 call options on BKKT for $23.20 per share. Her outlay was $17,608,800.
BKKT – Option Trade
The trade’s breakeven point was at $25.20, meaning that BKKT needed to rise to $25.20 for the call option trade to break even. This is almost 18% below the stock’s previous close of $30.60. For every $1 the stock rises above $25.20, our “smart money” trader makes $759,000!
On analyzing the daily chart of BKKT, the stock seems to be trading above gap supports, marked as blue color dotted lines. These would act as strong layers of support. This makes it likely our pro trader is bullish on BKKT.
BKKT – 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 December 17, 2021, $2.00 call options on BKKT for $23.20 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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