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’re launching 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 $1,759,884 That Palantir Technologies Inc. (NYSE: PLTR) Will Have a Significant Move in Either Direction in 6 Weeks.
On Wednesday, December 2, 2020, a “smart money” trader seems to have bought 2,993 of the 15-Jan-21 $27.00 call options on PLTR for $2.68 per share. His outlay was $802,124 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 2,993 of the 15-Jan-21 $21.00 put options on PLTR for $3.20 per share, which is an outlay of $957,760. His total outlay for this long strangle strategy was $1,759,884.
PLTR – Long Strangle Options Trade
PLTR will need to rise to $32.88 for the call option trade to break even — around a 46% return from the current price of $22.51. And then for every $1 the stock rises above $32.88, our “smart money” trader will make $299,300!
PLTR will need to decline to $15.12 for the put option trade to break even — around a 33% return from the current price of $22.51. And then for every $1 the stock decreases below $15.12, our “smart money” trader will make $299,300!
He seems to be anticipating the underlying stock to have a significant move in either direction within the next 10 weeks.
Trade #2: Trader Just Bet $107,018 That Pfizer Inc. (NYSE: PFE) Will Rise 10% in Just 2 Weeks.
On Tuesday, December 1, 2020, a “smart money” trader seems to have bought 1,466 of the 18-Dec-20 $41.00 call options on PFE for $1.32 per share. Her outlay was $193,512 for these options. In what appears to be a Bull Call Spread Strategy (wherein the investor buys a call option with a lower strike price and sells a call option with a higher price but with the same expiry date), she also seems to have sold 1,466 of the 18-Dec-20 $45.00 call options on PFE for $0.59 per share, which is an inflow of $86,494. Her total outlay for this Bull Call Spread Strategy was $107,018.
PFE – Bull Call Spread Options Trade
PFE needed to rise to $41.73 for the call option trade to break even, which is a 2% return from the current price of $40.80. Then, for every $1 the stock rises above $41.73, our “smart money” trader will make $146,600!
She seems to be anticipating the underlying stock to surge until $45.00, which is a nearly 10% return from the current price of $40.80.
Trade #3: Trader Just Bet $1,760,000 That Bank of America Corp (NYSE: BAC) Will Have a Significant Move in Either Direction in 2 Weeks.
On Wednesday, December 2, 2020, a “smart money” trader seems to have bought 10,000 of the 18-Dec-20 $30.00 call options on BAC for $1.43 per share. His outlay was $1,430,000 for these options. In what appears to be a Long Straddle Strategy (wherein the investor simultaneously purchases a call option and a put option on the same underlying asset with the same expiration date and strike price), he also seems to have bought 18-Dec-20 $30.00 put options on BAC for $0.33 per share, which is an outlay of $330,000. His total outlay for this Long Straddle Strategy was $1,760,000.
BAC – Long Straddle Options Trade
BAC will need to rise to $31.76 for the call option trade to break even — around a 9% return from the current price of $29.06. And then for every $1 the stock rises above $31.76, our “smart money” trader will make $1,000,000!
BAC will need to decline to $27.01 for the put option trade to break even — around a 7% return from the current price of $29.06. And then for every $1 the stock decreases below $27.01, our “smart money” trader will make $1,000,000!
He seems to be anticipating the underlying stock to have a significant move in either direction within the next 2 weeks.
Trade #4: Trader Just Made $725,000 Betting That Ishares Msci Brazil ETF (NYSE: EWZ) Will Stay Bearish For The Next 6 Weeks.
On Wednesday, December 2, 2020, a “smart money” trader seems to have bought 25,000 of the 15-Jan-21 $40.00 call options on EWZ for $0.21 per share. Her outlay was $525,000 for these options. In what appears to be a Bear call spread Strategy (wherein the investor buys a call option with a higher strike price and sells a call option with a lower strike price, but with the same expiry date), she also seems to have sold 25,000 of the 15-Jan-21 $38.00 call options on EWZ for $0.50 per share, which is an inflow of $1,250,000. Her total inflow for this Bear Call Spread Strategy was $725,000.
EWZ – Bear Call Spread Options Trade
A Bear Call Spread strategy is typically used to generate premium income based on a trader’s bearish view of a stock or index. She seems to be anticipating that the price of the underlying ETF would not cross above $38.00 until 15-Jan-2021.
Trade #5: Trader Just Bet $2,040,000 That Vale SA (NYSE: VALE) Will Have a Significant Move in Either Direction in 6 Weeks.
On Wednesday, December 2, 2020, a “smart money” trader seems to have bought 10,000 of the 15-Jan-21 $16.00 call options on VALE for $0.69 per share. His outlay was $690,000 for these options. In what appears to be a Long Straddle Strategy (wherein the investor simultaneously purchases a call option and a put option on the same underlying asset with the same expiration date and strike price), he also seems to have bought 10,000 of the 15-Jan-21 $16.00 put options on VALE for $1.35 per share, which is an outlay of $1,350,000. His total outlay for this Long Straddle Strategy was $2,040,000.
VALE – Long Straddle Options Trade
VALE will need to rise to $16.83 for the call option trade to break even — around a 10% return from the current price of $15.33. And then for every $1 the stock rises above $16.83, our “smart money” trader will make $1,000,000!
VALE will need to decline to $13.96 for the put option trade to break even — around a 9% return from the current price of $15.33. And then for every $1 the stock decreases below $13.96, our “smart money” trader will make $1,000,000!
He seems to be anticipating the underlying stock to have a significant move in either direction within the next 6 weeks.
Happy Trading!
— Trades of The Day Research Team
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