One of the most interesting “smart money” trades we came across yesterday was with Schlumberger NV (NYSE: SLB).
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 $3,449,600 that SLB Will Continue to Climb in the Next ONE Week
On Monday, February 7, 2022, a pro trader seems to have bought 4,480 of the February 18, 2022, $32.50 call options on SLB for $7.70 per contract. Her outlay was $3,449,600.
Interestingly, there seem to be multiple option trades done for SLB yesterday, for the same strike price and expiration date, with the total amount translating to multi-million dollars.
SLB – Option Trades
The trade’s breakeven point is at $40.20, meaning that SLB needed to rise to $40.20 for the call option trade to break even. This is near the stock’s previous close of $40.27. And then for every $1 the stock rises above $40.20, our “smart money” trader will make $448,000!
On analyzing the daily chart of SLB, the stock seems to have broken out of a flag pattern (marked as blue color lines). A flag is a bullish pattern and a breakout from it indicates that the stock could move higher. The stock is also trading above a support area, which is marked as a pink color dotted line. All this makes it likely that our pro trader is bullish on SLB.
SLB – 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 February 18, 2022, $32.50 call options on SLB for $7.70 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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