What if you could mimic the moves of some of the best-informed traders on the planet? That’s the idea behind a new series we recently launched that’s focused on what we’ll call “smart money” option trades.
In short, we’re using Market Chameleon to scan the options market for unusual activity and identifying some of the most interesting mega trades – relatively large volume options trades we can potentially mimic… but on a smaller scale!
While we can’t be 100% certain of the exact options strategies our “smart money” traders are employing on these trades, these are our best guesses based on the information we do have.
That said, here are 5 of the most interesting “smart money” trades we came across in the past week.
Trade #1: Trader Just Bet $225,000 that AES Corp (NYSE: AES) Will Rise 4.4% in ONE Week
On Wednesday, November 11, 2020, a “smart money” trader seems to have bought 5,000 of the November 20, 2020 $22 call options on AES for $0.20 per share. He also seems to have bought another 5,000 of the November 20, 2020 $22 call options on AES for $0.25 per share. His total outlay for the entire trade was $225,000.
AES – Options Trades
AES will need to rise to $22.225 for the call option trade to break even — a 4.40% return from the current price of $21.29.
For every $1 the stock rises above $22.225, our “smart money” trader will make $1,000,000! He seems to be anticipating the underlying stock to have a significant upmove soon because the charts indicate that the stock has currently broken above the resistance area of $21.00.
Trade #2: Trader Just Bet $132,628 That Datadog Inc. (NASDAQ: DDOG) Will Rise ~9.4% in 5 Weeks.
On Wednesday, November 11, 2020, a “smart money” trader seems to have bought 467 of the December 28, 2020 $85 call options on DDOG for $5.33 per share. Her outlay was $248,911 for these options. In what appears to be a bull spread strategy (wherein the investor buys an option at a lower strike price and sells one at a higher price but with the same expiry date), she also seems to have sold 467 of the December 18, 2020 $95 call options on DDOG for $2.49 per share, which is an inflow of $116,283. Her total outlay for this bull spread strategy was $132,628.
DDOG – Options Trades
DDOG will need to rise to $87.84 for the call option trade to break even — around a 1% return from the current price of $86.83. And then for every $1 the stock rises above $87.84, our “smart money” trader will make $46,700!
She seems to be anticipating the underlying stock to surge until $95.00, which is a nearly 9.4% return from current prices.
Trade #3: Trader Just Bet $1,684,267 That D. R. Horton Inc. (NYSE: DHI) Will Have a Significant Move in Either Direction in 10 Weeks.
On Wednesday, November 11, 2020, a “smart money” trader seems to have bought 5,633 of the January 15, 2021 $80 call options on DHI for $1.72 per share. His outlay was $968,876 for these options. In what appears to be a long strangle strategy (wherein the investor simultaneously buys an out-of-the-money call and an out-of-the-money put option with the same expiration date), he also seems to have bought 5,633 of the January 15, 2021 $60 put options on DHI for $1.27 per share, which is an outlay of $715,391. His total outlay for this long strangle strategy was $1,684,267.
DHI – Options Trades
DHI will need to rise to $82.99 for the call option trade to break even — around a 14% return from the current price of $72.85. And then for every $1 the stock rises above $82.99, our “smart money” trader will make $563,300!
DHI will need to decline to $57.01 for the put option trade to break even — around a 22% return from the current price of $72.85. And then for every $1 the stock decreases below $57.01, our “smart money” trader will make $563,300!
He seems to be anticipating the underlying stock to have a significant move in either direction within the next 10 weeks.
Trade #4 Trader Just Bet $66,720 That Restaurant Brands International Inc. (NYSE: QSR) Will Fall ~5% in ONE Week
On Wednesday, November 11, 2020, a “smart money” trader seems to have bought 834 of the November 20, 2020 $57.50 put options on QSR for $1.11 per share. His outlay was $92,576 for these options. He also seems to have sold 834 of the November 20, 2020 $60 call options on QSR for $0.31 per share, which is an inflow of $25,854. His total outlay for this trade was $66,720.
QSR – Options Trades
The trader seems to be having a bearish outlook on the stock. This is presumed due to the strong resistance level at $60 in the charts of QSR.
QSR will need to decline to $56.70 for the put option trade to break even — around a 1.2% decline from the current price of $57.41. And then for every $1 the stock falls below $56.70, our “smart money” trader will make $83,400!
The charts show that the next nearest support for the stock is near $54.50, which is nearly 5% downside from the current prices.
Trade #5: Trader Just Bet $440,000 That CNX Resources Corp (NYSE: CNX) Will Rise ~8.5% in 5 Weeks.
On Wednesday, November 11, 2020, a “smart money” trader seems to have bought 5,500 of the December 18, 2020 $10 call options on CNX for $0.80 per share. Her outlay was $440,000.
CNX – Options Trades
CNX will need to rise to $10.80 for the call option trade to break even — an 8.5% return from the current price of $9.95. And then our “smart money” trader will make $550,000 for every $1 the stock rises above $10.80!
We have made this assumption based on the analysis of the charts, which shows that there is a strong support area for the stock near the $9.70. According to the charts, the stock is likely to reach $12 by mid-December, which translates to a 21% return from the current levels!
Happy Trading!
— Trades of The Day Research Team
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