One of the most interesting “smart money” trades we came across yesterday was with Apple Inc. (NASDAQ: AAPL).
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 $5,726,280 that AAPL Will Continue to Climb in the Next 5 Weeks
On Friday, November 19, 2021, a pro trader seems to have bought 2,807 of the December 23, 2021, $140 call options on AAPL for $20.40 per contract. His outlay was $5,726,280.
The trade’s breakeven point is at $160.40, meaning that AAPL needed to rise to $160.40 for the call option trade to break even. This is near the stock’s previous close of $160.55. For every $1 the stock rises above $160.40, our “smart money” trader will make $280,700!
On analyzing the daily chart of AAPL, the stock seems to have broken out of a symmetrical triangle pattern (marked as blue color lines). This breakout level would now act as a strong support area. The stock is also trading above the previous high price, which is marked as a purple color dotted line. All this makes it likely that our pro trader is bullish on AAPL.
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 23, 2021, $140 call options on AAPL for $20.40 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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