One of the most interesting “smart money” trades we came across yesterday was with BRC Inc. (NYSE: BRCC).
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 $3,645,000 that BRCC Will Continue to Climb in the Next 4 Months
On Wednesday, April 6, 2022, a pro trader seems to have bought 2,700 of the July 15, 2022, $12.50 call options on BRCC for $13.50 per contract. Her outlay was $3,645,000.
Interestingly, there seem to be multiple option trades done for BRCC yesterday, for the same strike price and expiration date, with the total amount translating to multi-million dollars.
BRCC – Option Trades
The trade’s breakeven point is at $26.00, meaning that BRCC needed to rise to $26.00 for the call option trade to break even. The stock’s previous close of $26.64 is already above the breakeven point. For every $1 the stock rises above $26.00, our “smart money” trader will make $270,000!
On analyzing the daily chart of BRCC, 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 a support area which is marked as a pink color dotted line. All this makes it likely that our pro trader is bullish on BRCC.
BRCC – 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 July 15, 2022, $12.50 call options on BRCC for $13.50 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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