One of the most interesting “smart money” trades we came across yesterday was with IBM (NYSE: IBM).
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 $1,177,330 that IBM Will Continue to Climb in the Next 12 Weeks
On Wednesday, April 20, 2022, a pro trader seems to have bought 9,730 of the July 15, 2022, $150 call options on IBM for $1.21 per contract. Her outlay was $1,177,330.
IBM – Option Trade
The trade’s breakeven point is at $151.21, meaning that IBM needs to rise to $151.21 for the call option trade to break even. This is a nearly 9% upside from the stock’s previous close of $138.32. And then for every $1 the stock rises above $151.21, our “smart money” trader will make $973,000!
On analyzing the daily chart of IBM, 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. This makes it likely that our pro trader is bullish on IBM.
IBM – 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, $150 call options on IBM for $1.21 per contract 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
Nvidia's Secret Partner... This Is The New AI Chip Powerhouse [sponsor]I bet you've never heard of it... but this newly public company is set to become key to Nvidia's seat on the AI throne. And for now... you can get in while it's still cheap. Details Here! Find Out What It Is Right Here.