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 $1,437,500 That Tesla Inc. (NASDAQ: TSLA) Will Rise 8% in ONE Week.
On Friday, December 31, 2020, a “smart money” trader seems to have bought 1,150 of the 15-Jan-21 $750.00 call options on TSLA for $19.25 per share. Her outlay was $2,213,750 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 strike price but with the same expiry date), she also seems to have sold 1,150 of the 15-Jan-21 $820.00 call options on TSLA for $6.75 per share, which is an inflow of $776,250. Her total outlay for this Bull Call Spread Strategy was $1,437,500.
TSLA – Bull Call Spread Options Strategy
TSLA needs to rise to $762.50 for the call option trade to break even – around a 1% return from the current price of $755.98. Then, for every $1 the stock rises above $762.50, our “smart money” trader will make $115,000!
She seems to be anticipating the underlying stock to surge until $820, which is a nearly 8% return from the current price of $755.98.
Trade #2: Trader just made $467,400 betting that VanEck Vectors Gold Miners ETF (NYSE: GDX) Will Rise 17% In 6 Months
On Monday, January 4, 2021, a “smart money” trader seems to have bought 4,100 of the 18-Jun-21 $35.00 put options on GDX for $2.30 per share. His outlay was $943,000 for these options. In what appears to be an Iron Condor options strategy (created with four options; wherein the investor sells an out-of-the-money call and an out-of-the-money put, while simultaneously buying a further out-of-the-money call and a further out-of-the-money put), he also seems to have done the following: sold 4,100 of the 18-Jun-21 $36.00 put options on GDX for $2.76 per share, translating to an inflow of $1,131,600; bought 4,100 of the 18-Jun-21 $49.00 call options on GDX for $1.21 per share, translating to an outlay of $496,100; and sold 4,100 of the 18-Jun-21 $45.00 call options on GDX for $1.89 per share, translating to an inflow of $774,900. His total inflow for this Iron Condor options strategy was $1,437,500.
GDX – Iron Condor Options Strategy
An Iron Condor options strategy is typically used to generate premium income. He seems to be anticipating that the price of the underlying ETF would remain between $36.00 and $45.00 until 18-Jun-2021. The ETF could surge until $45 in the next 6 months, which is a nearly 17% return from the current price of $38.46.
Trade #3: Trader Just Made $94,944 Betting That JD.Com Inc. (NASDAQ: JD) Will Stay Bearish For The Next ONE Week.
On Tuesday, January 5, 2021, a “smart money” trader seems to have bought 1,032 of the 15-Jan-21 $105.00 call options on JD for $0.71 per share. Her outlay was $73,272 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 1,032 of the 15-Jan-21 $100.00 call options on JD for $1.63 per share, which is an inflow of $168,216. Her total inflow for this Bear Call Spread Strategy was $94,944.
JD – Bear Call Spread Options Strategy
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 $100.00 until 15-Jan-2021.
Trade #4: Trader Just Bet That iShares Russell 2000 ETF (NYSE: IWM) Will Rise 13% in 10 Weeks.
On Wednesday, January 6, 2021, a “smart money” trader seems to have bought 9,391 of the 19-Mar-21 $215.00 call options on IWM for $ 4.97 per share. His outlay was $4,667,330 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 strike price but with the same expiry date), he also seems to have sold 9,391 of the 19-Mar-21 $230.00 call options on IWM for $1.44 per share, which is an inflow of $1,352,300. In what appears to be a strategy to lower the total outlay, he seems to have sold 9,391 of the 19-Mar-21 $180.00 put options on IWM for $3.59 per share, which is an inflow of $3,371,370. He ended up with an inflow of $56,340 for this Bull Call Spread Strategy with a put option.
IWM – Bull Call Spread Options Strategy
IWM needs to rise to $214.94 for the call option trade to break even – around a 5% return from the current price of $204.53. Then, for every $1 the ETF rises above $214.94, our “smart money” trader will make $939,100!
He seems to be anticipating the underlying ETF to surge until $230.00, which is a nearly 13% return from the current price of $204.53.
Trade #5: Trader Just Bet $4,488,000 That Bank of America Corp (NYSE: BAC) Will Have a Significant Move in Either Direction in ONE Week.
On Wednesday, January 6, 2021, a “smart money” trader seems to have bought 17,000 of the 15-Jan-21 $30.00 call options on BAC for $2.56 per share. Her outlay was $4,352,000 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), she also seems to have bought 17,000 of the 15-Jan-21 $30.00 put options on BAC for $0.08 per share, which is an outlay of $136,000. Her total outlay for this Long Straddle Strategy was $4,488,000.
BAC – Long Straddle Options Strategy
BAC will need to rise to $32.64 for the call option trade to break even — around a 2% return from the current price of $32.15. And then for every $1 the stock rises above $32.64, our “smart money” trader will make $1,700,000!
BAC will need to decline to $27.36 for the put option trade to break even — around a 15% return from the current price of $32.15. And then for every $1 the stock decreases below $27.36, our “smart money” trader will make $1,700,000!
He seems to be anticipating the underlying stock to have a significant move in either direction within the next week.
Happy Trading!
— Trades of The Day Research Team
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