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 $3,500,000 That CBS Corporation Common Stock (NASDAQ: VIAC) Will Decline 14% in 8 Weeks
On Wednesday, March 24, 2021, a “smart money” trader seems to have bought 3,500 of the 21-May-21 $80.00 put options on VIAC for $13.45 per share. His outlay was $4,707,500 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 3,500 of the 21-May-21 $60.00 put options on VIAC for $3.45 per share, which is an inflow of $$1,207,500. His total outlay for this Bear Put Spread Strategy was $3,500,000.
VIAC- Bear Put Spread Options Strategy
VIAC needed to decline to $70.00 for the put option trade to break even. Then, for every $1 the stock moves below $70.00, our “smart money” trader will make $350,000! It may be noted that the trader’s profit will be limited till the price of $60.00 as he had sold the $60.00 strike price put options.
He seems to be anticipating the underlying stock to decline until $60.00, which is a nearly 14% return from the current price of $70.10.
Trade #2: Trader Just Bet $7,040,000 That iShares China Large-Cap ETF (NYSE: FXI) Will Have a Significant Move in Either Direction in 3 Weeks.
On Wednesday, March 24, 2021, a “smart money” trader seems to have bought 16,000 of the 16-Apr-21 $50.00 call options on FXI for $0.10 per share. Her outlay was $160,000 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 16,000 of the 16-Apr-21 $50.00 put options on FXI for $4.30 per share, which is an outlay of $6,880,000 Her total outlay for this Long Straddle Strategy was $7,040,000.
FXI – Long Straddle Options Strategy
FXI will need to rise to $54.40 for the call option trade to break even — around a 21% return from the current price of $45.11. And then for every $1 the ETF rises above $54.40, our “smart money” trader will make $1,600,000!
FXI needed to decline to $45.60 for the put option trade to break even. And then for every $1 the ETF decreases below $45.60, our “smart money” trader will make $1,600,000!
She seems to be anticipating the underlying ETF to have a significant move in either direction within the next 3 weeks.
Trade #3: Trader Just Bet $2,458,000 That iShares Russell 2000 ETF (NYSE: IWM) Will Decline 2% in 1 Week.
On Tuesday, March 23, 2021, “smart money” trader seems to have bought 20,000 of the 31-Mar-21 $215.00 put options on IWM for $2.93 per share. His outlay was $5,860,000 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 27,000 of the 31-Mar-21 $208.00 put options on IWM for $1.26 per share, which is an inflow of $3,402,000. His total outlay for this Bear Put Spread Strategy was $2,458,000.
IWM – Bear Put Spread Options Strategy
IWM needed to decline to $213.33 for the put option trade to break even. Then, for every $1 the ETF moves below $213.33, our “smart money” trader will make $2,000,000! It may be noted that the trader’s profit will be limited till the price of $208.00 as he had sold the $208.00 strike price put options.
He seems to be anticipating the underlying ETF to decline until $208.00, which is a nearly 2% return from the current price of $212.04.
Trade #4: Trader Just Bet $2,997,000 That Facebook, Inc. Common Stock (NASDAQ: FB) Will Have a Significant Move in Either Direction in 3 Weeks.
On Monday, March 22, 2021, a “smart money” trader seems to have bought 1,500 of the 16-Apr-21 $295.00 call options on FB for $10.94 per share. Her outlay was $1,641,000 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 1,500 of the 16-Apr-21 $295.00 put options on FB for $9.04 per share, which is an outlay of $1,356,000. Her total outlay for this Long Straddle Strategy was $2,997,000.
FB – Long Straddle Options Strategy
FB will need to rise to $314.98 for the call option trade to break even — around a 12% return from the current price of $282.14. And then for every $1 the stock rises above $314.98, our “smart money” trader will make $150,000!
FB will need to decline to $275.02 for the put option trade to break even — around a 3% return from the current price of $282.14. And then for every $1 the stock decreases below $275.02, our “smart money” trader will make $150,000!
She seems to be anticipating the underlying stock to have a significant move in either direction within the next 3 weeks.
Trade #5: Trader Just Made $4,047,630 Betting That iShares iBoxx $ High Yield Corporate Bond ETF (NYSE: HYG) Will Stay Bullish For The Next 3 Weeks.
On Tuesday, March 23, 2021, a “smart money” trader seems to have bought 134,921of the 16-Apr-21 $82.00 put options on HYG for $0.15 per share. His outlay was $2,023,820 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 134,921 of the 16-Apr-21 $85.00 put options on HYG for $0.45 per share, which is an inflow of $6,071,450. His total inflow for this Bull Put Spread Strategy was $4,047,630.
HYG – 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 stay above $85.00 until 16-Apr-2021.
Happy Trading!
— Trades of The Day Research Team
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