One of the most interesting “smart money” trades we came across yesterday was with Uber Technologies Inc. (NYSE: UBER).
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 $12,128,475 Betting that UBER will Stay Below $35 For the Next ONE Week
On Thursday, February 10, 2022, a pro trader seems to have sold 30,705 of the February 18, 2022, $35 call options on UBER for $3.95 per contract. Her inflow was $12,128,475.
UBER – Option Trade
UBER will need to stay below $35 in the next one week so that the trader can buy back the 18-Feb-22 $35.00 call options for next to nothing. And then our “smart money” trader will get to keep the $12,128,475 she had received when selling the 18-Feb-22 $35.00 call options.
On analyzing the chart of UBER Inc., the stock seems to be trading within a downtrend channel (marked as blue color lines). There is also a gap resistance nearby for the stock, which is marked as a pink color dotted line. All this makes it likely our pro trader is bearish on UBER Inc.
UBER – Daily Chart
This lends credence to our conclusion that the pro sold these call 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, $35 call options on UBER for $3.95 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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