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 $293,700 That GameStop Corp. (NYSE: GME) Will Rise 24% in ONE Week
On Wednesday, January 13, 2021, a “smart money” trader seems to have bought 979 of the 22-Jan-21 $30.00 call options on GME for $5.63 per share. Her outlay was $551,177 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 979 of the 22-Jan-21 $39.00 call options on GME for $2.63 per share, which is an inflow of $257,477. Her total outlay for this Bull Call Spread Strategy was $293,700.
GME – Bull Call Spread Options Strategy
GME needs to rise to $33.00 for the call option trade to break even — around a 5% return from the current price of $31.40. Then, for every $1 the stock rises above $33.00, our “smart money” trader will make $97,900!
She seems to be anticipating the underlying stock to surge until $39.00, which is a nearly 24% return from the current price of $31.40.
Trade #2: Trader Just Bet $645,000 That Intel Corporation (NASDAQ: INTC) Will Decline 21% in 5 Months
On Wednesday, January 13, 2021, a “smart money” trader seems to have bought 1,500 of the 18-Jun-21 $57.50 put options on INTC for $5.50 per share. His outlay was $825,000 for these options. In what appears to be a Bear Put Spread Strategy (wherein the investor buys a put option with a higher strike price and sells a put option with a lower strike price but with the same expiry date), he also seems to have sold 1,500 of the 18-Jun-21 $45.00 put options on INTC for $1.20 per share, which is an inflow of $180,000. His total outlay for this Bear Put Spread Strategy was $645,000.
INTC – Bear Put Spread Options Strategy
INTC needs to decline to $53.20 for the put option trade to break even — around a 7% return from the current price of $56.95. Then, for every $1 the stock moves below $53.20, our “smart money” trader will make $150,000! It may be noted that the trader’s profit will be limited till the price of $45.00 as he had sold the $45.00 strike price put options.
He seems to be anticipating the underlying stock to decline until $45.00, which is a nearly 21% return from the current price of $56.95.
Trade #3: Trader Just Bet $1,264,000 That General Motors Company (NYSE: GM) Will Rise 13% in 2 Weeks.
On Tuesday, January 12, 2021, a “smart money” trader seems to have bought 8,000 of the 29-Jan-21 $48.00 call options on GM for $2.23 per share. Her outlay was $1,784,000 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 8,000 of the 29-Jan-21 $55.00 call options on GM for $0.65 per share, which is an inflow of $520,000. Her total outlay for this Bull Call Spread Strategy was $1,264,000.
GM – Bull Call Spread Options Strategy
GM needs to rise to $49.58 for the call option trade to break even — around a 2% return from the current price of $48.73. Then, for every $1 the stock rises above $49.58, our “smart money” trader will make $800,000!
She seems to be anticipating the underlying stock to surge until $55.00, which is a nearly 13% return from the current price of $48.73.
Trade #4: Trader Just Made $1,129,920 Betting That iShares iBoxx $ High Yield Corporate Bond ETF (NYSE: HYG) Will Stay Bullish For The Next 9 Weeks.
On Tuesday, January 12, 2021, a “smart money” trader seems to have bought 28,890 of the 19-Mar-21 $78.00 put options on HYG for $0.22 per share. His outlay was $635,580 for these options. In what appears to be a Bull Put Spread Strategy (wherein the investor buys a put option with a lower strike price and sells a put option with a higher strike price but with the same expiry date), he also seems to have sold 32,100 of the 19-Mar-21 $83.00 put options on HYG for $0.55 per share, which is an inflow of $1,765,500. His total inflow for this Bull Put Spread Strategy was $1,129,920.
HUG – Bull Put Spread Options Strategy
A Bull Put Spread Strategy is typically used to generate premium income based on a trader’s bullish view of a stock or index. He seems to be anticipating that the price of the ETF would close above $83.00 by 19-Mar-2021.
Trade #5: Trader Just Bet $422,000 That Bank of America Corp (NYSE: BAC) Will Rise 5% in 9 Weeks.
On Tuesday, January 12, 2021, a “smart money” trader seems to have bought 6,000 of the 19-Mar-21 $33.00 call options on BAC for $2.15 per share. Her outlay was $1,290,000 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 7,000 of the 19-Mar-21 $35.00 call options on BAC for $1.24 per share, which is an inflow of $868,000. Her total outlay for this Bull Call Spread Strategy was $422,000.
BAC – Bull Call Spread Options Strategy
BAC needs to rise to $33.91 for the call option trade to break even — around a 1% return from the current price of $33.46. Then, for every $1 the stock rises above $33.91, our “smart money” trader will make $600,000!
She seems to be anticipating the underlying stock to surge until $35.00, which is a nearly 5% return from the current price of $33.46.
Happy Trading!
— Trades of The Day Research Team