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 $10,356,500 That Alibaba Group Holding Ltd – ADR (NYSE: BABA) Will Have a Significant Move in Either Direction in 9 Weeks
On Monday, April 12, 2021, a “smart money” trader seems to have bought 3,500 of the 18-Jun-21 $240.00 call options on BABA for $15.79 per share. Her outlay was $5,526,500 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 3,500 of the 18-Jun-21 $240.00 put options on BABA for $13.80 per share, which is an outlay of $4,830,000. Her total outlay for this Long Straddle Strategy was $10,356,500.
BABA – Long Straddle Options Strategy
BABA will need to rise to $269.59 for the call option trade to break even — around a 13% return from the current price of $239.23. And then for every $1 the stock rises above $269.59, our “smart money” trader will make $350,000!
BABA will need to decline to $210.41 for the put option trade to break even— around a 12% return from the current price of $239.23. And then for every $1 the stock decreases below $210.41, our “smart money” trader will make $350,000!
She seems to be anticipating the underlying stock to have a significant move in either direction within the next 9 weeks.
Trade #2: Trader Just Bet $1,875,000 That NVIDIA Corporation (NASDAQ: NVDA) Will Decline 26% in 5 Weeks
On Tuesday, April 13, 2021, a “smart money” trader seems to have bought 1,000 of the 21-May-21 $600.00 put options on NVDA for $19.50 per share. His outlay was $1,950,000 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 1,000 of the 21-May-21 $450.00 put options on NVDA for $0.75 per share, which is an inflow of $75,000. Her total outlay for this Bear Put Spread Strategy was $1,875,000.
NVDA – Bear Put Spread Options Strategy
NVDA needs to decline to $581.25 for the put option trade to break even – around a 5% return from the current price of $611.08. Then, for every $1 the stock moves below $581.25, our “smart money” trader will make $600,000! It may be noted that the trader’s profit will be limited till the price of $450.00 as he had sold the $450.00 strike price put options.
He seems to be anticipating the underlying stock to decline until $450, which is a nearly 26% return from the current price of $611.08.
Trade #3: Trader Just Bet $1,085,000 That Nuance Communications Inc. (NASDAQ: NUAN) Will Have a Significant Move in Either Direction in 9 Months.
On Monday, April 12, 2021, a “smart money” trader seems to have bought 5,000 of the 21-Jan-22 $60.00 call options on NUAN for $0.60 per share. Her outlay was $300,000 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), she also seems to have bought 5,000 of the 21-Jan-22 $50.00 put options on NUAN for $1.57 per share, which is an outlay of $785,000. Her total outlay for this long strangle strategy was $1,085,000.
NUAN – Long Strangle Options Strategy
NUAN will need to rise to $62.17 for the call option trade to break even — around an 18% return from the current price of $52.79. And then for every $1 the stock rises above $62.17, our “smart money” trader will make $500,000!
NUAN will need to decline to $47.83 for the put option trade to break even — around a 9% return from the current price of $52.79. And then for every $1 the stock decreases below $47.83, our “smart money” trader will make $500,000!
She seems to be anticipating the underlying fund to have a significant move in either direction within the next 9 months.
Trade #4: Trader Just Made $4,000,000 Betting That Discovery Inc Series C (NASDAQ: DISCK) Will Stay Bullish For The Next 9 Weeks.
On Wednesday, April 14, 2021, a “smart money” trader seems to have bought 20,000 of the 18-Jun-21 $25.00 put options on DISCK for $0.32 per share. His outlay was $640,000 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 20,000 of the 18-Jun-21 $32.50 put options on DISCK for $2.32 per share, which is an inflow of $4,640,000. His total inflow for this Bull Put Spread Strategy was $4,000,000.
DISCK – 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 stock would stay above $25.00 until 18-Jun-2021.
Trade #5: Trader Just Bet $2,700,000 That Goldman Sachs Group Inc. (NYSE: GS) Will Have a Significant Move in Either Direction in 5 Months.
On Wednesday, April 14, 2021, a “smart money” trader seems to have bought 600 of the 17-Sep-21 $320.00 call options on GS for $36.20 per share. Her outlay was $2,172,000 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), she also seems to have bought 600 of the 17-Sep-21 $300.00 put options on GS for $8.80 per share, which is an outlay of $528,000. Her total outlay for this long strangle strategy was $2,700,000.
GS – Long Strangle Options Strategy
GS will need to rise to $365.00 for the call option trade to break even — around a 9% return from the current price of $335.35. And then for every $1 the fund rises above $365, our “smart money” trader will make $60,000!
GS will need to decline to $255.00 for the put option trade to break even — around a 24% return from the current price of $335.35. And then for every $1 the fund decreases below $255.00, our “smart money” trader will make $60,000!
She seems to be anticipating the underlying fund to have a significant move in either direction within the next 5 months.
Happy Trading!
— Trades of The Day Research Team
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