One of the most interesting “smart money” trades we came across yesterday was 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 Made $8,600,000 Betting that AAPL will Stay Above $185 For the Next 3 Weeks
On Friday, January 28, 2021, a pro trader seems to have sold 5,000 of the February 18, 2022, $185 put options on AAPL for $17.20 per contract. His inflow was $8,600,000.
AAPL – Option Trade
AAPL will need to stay above $185 in the next 3 weeks so that the trader can buy back the 18-Feb-22 $185.00 put options for next to nothing. And then our “smart money” trader will get to keep the $8,600,000 he had received when selling the 18-Feb-22 $185.00 put options.
On analyzing the chart of AAPL, the stock seems to have broken out of a flag pattern, which is marked in blue color. The stock is also trading above a strong support area, which is marked as a pink color dotted line. All this makes it likely that our pro trader is bullish on AAPL.
AAPL – Daily Chart
This lends credence to our conclusion that the pro sold these put options, as opposed to buying them.
If you agree and would like to mimic this trade, here’s how:
Sell to open the February 18, 2022, $185 put options on AAPL for $17.20 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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