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 $426,000 That Invesco ARK Innovation ETF (NYSE: ARKK) Will Decline 9% in 5 Weeks
On Monday, March 8, 2021, a “smart money” trader seems to have bought 600 of the 16-Apr-21 $125.00 put options on ARKK for $14.60 per share. Her outlay was $876,000 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), she also seems to have sold 600 of the 16-Apr-21 $110.00 put options on ARKK for $7.50 per share, which is an inflow of $450,000. Her total outlay for this Bear Put Spread Strategy was $426,000.
ARKK – LVS -Bear Put Spread Options Strategy
ARKK will need to decline to $117.9 for the put option trade to break even – around a 3% return from the current price of $121.19. Then, for every $1 the ETF moves below $117.9, our “smart money” trader will make $60,000! It may be noted that the trader’s profit will be limited till the price of $110.00 as she had sold the $110.00 strike price put options.
She seems to be anticipating the underlying ETF to decline until $110.00, which is a nearly 9% return from the current price of $121.19.
Trade #2: Trader Just Bet $304,200 That Draftkings Inc. (NASDAQ: DKNG) Will Rise 1% in 1 Week
On Wednesday, March 10, 2021, a “smart money” trader seems to have bought 1,872 of the 19-Mar-21 $63.00 call options on DKNG for $6.95 per share. His outlay was $1,301,040 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 3,510 of the 19-Mar-21 $70.00 call options on DKNG for $2.84 per share, which is an inflow of $996,840. His total outlay for this Bull Call Spread Strategy was $304,200.
DKNG – Bull Call Spread Options Strategy
DKNG needed to rise to $67.11 for the call option trade to break even. Then, for every $1 the stock rose above $67.11, our “smart money” trader made $187,200!
He seems to be anticipating the underlying stock to surge until $70.00, which is a nearly 1% return from the current price of $69.29.
Trade #3: Trader Just Bet $1,196,000 That Comcast Corporation (NASDAQ: CMCSA) Will Have a Significant Move in Either Direction in 5 Weeks.
On Wednesday, March 10, 2021, a “smart money” trader seems to have bought 2,000 of the 16-Apr-21 $62.50 call options on CMCSA for $0.29 per share. Her outlay was $58,000 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 2,000 of the 16-Apr-21 $62.50 put options on CMCSA for $5.69 per share, which is an outlay of $1,138,000. Her total outlay for this Long Straddle Strategy was $1,196,000.
CMCSA – Long Straddle Options Strategy
CMCSA will need to rise to $68.48 for the call option trade to break even — around a 20% return from the current price of $57.21. And then for every $1 the stock rises above $68.48, our “smart money” trader will make $200,000!
CMCSA will need to decline to $56.52 for the put option trade to break even — around a 1% return from the current price of $57.21. And then for every $1 the stock decreases below $56.52, our “smart money” trader will make $200,000!
She seems to be anticipating the underlying stock to have a significant move in either direction within the next 5 weeks.
Trade #4: Trader Just Bet $5,237,100 That Financial Select Sector SPDR Fund (NYSE: XLF) Will Rise 1% in 2 Months
On Tuesday, March 9, 2021, a “smart money” trader seems to have bought 113,850 of the 21-May-21 $34.00 call options on XLF for $1.38 per share. His outlay was $15,711,300 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 113,850 of the 21-May-21 $35.00 call options on XLF for $0.92 per share, which is an inflow of $10,474,200. His total outlay for this Bull Call Spread Strategy was $5,237,100.
XLF – Bull Call Spread Options Strategy
XLF needed to rise to $34.46 for the call option trade to break even. Then, for every $1 the stock moved above $34.46, our “smart money” trader made $11,385,000!
He seems to be anticipating the underlying stock to surge until $35.00, which is a nearly 1% return from the current price of $34.52.
Trade #5: Trader Just Bet $ That Workhorse Group Inc. (NASDAQ: WKHS) Will Have a Significant Move in Either Direction in 1 Week.
On Monday, March 8, 2021, a “smart money” trader seems to have bought 2,500 of the 19-Mar-21 $20.00 call options on WKHS for $0.90 per share. Her outlay was $225,000 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 2,500 of the 19-Mar-21 $20.00 put options on WKHS for $5.30 per share, which is an outlay of $1,325,000. Her total outlay for this Long Straddle Strategy was $1,550,000.
WKHS – Long Straddle Options Strategy
WKHS will need to rise to $26.20 for the call option trade to break even — around a 64% return from the current price of $15.94. And then for every $1 the stock rises above $26.20, our “smart money” trader will make $250,000!
WKHS will need to decline to $13.80 for the put option trade to break even — around a 13% return from the current price of $15.94. And then for every $1 the stock decreases below $13.80, our “smart money” trader will make $250,000!
She seems to be anticipating the underlying stock to have a significant move in either direction within the next 1 week.
Happy Trading!
— Trades of The Day Research Team