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 $3,860,000 That Bank of America Corp (NYSE: BAC) Will Have a Significant Move in Either Direction in 2 Weeks.
On Wednesday, March 3, 2021, a “smart money” trader seems to have bought 10,000 of the 19-Mar-21 $40.00 call options on BAC for $0.13 per share. Her outlay was $130,000 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 10,000 of the 19-Mar-21 $40.00 put options on BAC for $3.73 per share, which is an outlay of $3,730,000. Her total outlay for this Long Straddle Strategy was $3,860,000.
BAC – Long Straddle Options Strategy
BAC will need to rise to $43.86 for the call option trade to break even — around a 20% return from the current price of $36.42. And then for every $1 the stock rises above $43.86, our “smart money” trader will make $1,000,000!
BAC will need to decline to $36.14 for the put option trade to break even — around a 1% return from the current price of $36.42. And then for every $1 the stock decreases below $36.14, our “smart money” trader will make $1,000,000!
She seems to be anticipating the underlying stock to have a significant move in either direction within the next 2 weeks.
Trade #2: Trader Just Bet $26,000 That Las Vegas Sands Corp. (NYSE: LVS) Will Rise 6% in 3 Months
On Wednesday, March 3, 2021, a “smart money” trader seems to have bought 3,500 of the 18-Jun-21 $65.00 call options on LVS for $7.00 per share. His outlay was $2,450,000 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), he also seems to have sold 4,000 of the 18-Jun-21 $70.00 call options on LVS for $5.05 per share, which is an inflow of $2,020,000. In what appears to be a strategy to lower the total outlay, he seems to have sold 4,000 of the 18-Jun-21 $90.00 call options on LVS for $1.01 per share, which is an inflow of $404,000. His total outlay for this Bull Call Spread Strategy with a call option was $26,000.
LVS – Bull Call Spread Options Strategy
LVS needs to rise to $65.94 for the call option trade to break even. Then, for every $1 the stock rises above $65.94, our “smart money” trader would make $350,000!
He seems to be anticipating the underlying stock to surge until $70.00, which is a nearly 6% return from the current price of $65.82.
Trade #3: Trader Just Bet $9,568,670 That Invesco QQQ Trust Series 1 (NASDAQ: QQQ) Will Decline 3% in 2 Weeks
On Wednesday, March 3, 2021, a “smart money” trader seems to have bought 11,062 of the 19-Mar-21 $320.00 put options on QQQ for $13.88 per share. Her outlay was $15,354,100 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), she also seems to have sold 11,062 of the 19-Mar-21 $300.00 put options on QQQ for $5.23 per share, which is an inflow of $5,785,430. Her total outlay for this Bear Put Spread Strategy was $9,568,670.
QQQ- Bear Put Spread Options Strategy
QQQ needed to decline to $311.35 for the put option trade to break even. Then, for every $1 the ETF moves below $311.35, our “smart money” trader will make $1,106,200! It may be noted that the trader’s profit will be limited till the price of $300.00 as she had sold the $300.00 strike price put options.
She seems to be anticipating the underlying ETF to decline until $300.00, which is a nearly 3% return from the current price of $309.16.
Trade #4: Trader Just Bet $921,600 That Ishares Msci Brazil ETF (NYSE: EWZ) Will Have a Significant Move in Either Direction in 2 Weeks.
On Tuesday, March 2, 2020, a “smart money” trader seems to have bought 19,200 of the 19-Mar-21 $35.00 call options on EWZ for $0.25 per share. His outlay was $480,000 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 19,200 of the 19-Mar-21 $27.00 put options on EWZ for $0.23 per share, which is an outlay of $441,600. His total outlay for this long strangle strategy was $921,600.
EWZ- Long Strangle Options Strategy
EWZ will need to rise to $35.48 for the call option trade to break even — around a 10% return from the current price of $32.19. And then for every $1 the stock rises above $35.48, our “smart money” trader will make $1,920,000!
EWZ will need to decline to $26.52 for the put option trade to break even — around an 18% return from the current price of $32.19. And then for every $1 the stock decreases below $26.52, our “smart money” trader will make $1,920,000!
He seems to be anticipating the underlying stock to have a significant move in either direction within the next 2 weeks.
Trade #5: Trader Just Bet $5,145,000 That Rocket Companies Inc. (NYSE: RKT) Will Have a Significant Move in Either Direction in 2 Weeks.
On Tuesday, March 2, 2021, a “smart money” trader seems to have bought 3,000 of the 19-Mar-21 $30.00 call options on RKT for $13.30 per share. Her outlay was $3,990,000 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 3,000 of the 19-Mar-21 $30.00 put options on RKT for $3.85 per share, which is an outlay of $1,155,000. Her total outlay for this Long Straddle Strategy was $5,145,000.
RKT- Long Straddle Options Strategy
RKT will need to rise to $47.15 for the call option trade to break even — around a 68% return from the current price of $28.01. And then for every $1 the stock rises above $47.15, our “smart money” trader will make $300,000!
RKT will need to decline to $12.85 for the put option trade to break even — around a 54% return from the current price of $28.01. And then for every $1 the stock decreases below $12.85, our “smart money” trader will make $300,000!
She seems to be anticipating the underlying stock to have a significant move in either direction within the next 2 weeks.
Happy Trading!
— Trades of The Day Research Team