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 Made $46,000 Betting That Clover Health Investments Corp (NASDAQ: CLOV) Will Stay Bearish For The Next 1 Week
On Tuesday, June 08, 2021, a “smart money” trader seems to have bought 1,000 of the 18-Jun-21 $22.00 call options on CLOV for $4.81 per share. His outlay was $481,000 for these options. In what appears to be a Bear Call spread Strategy (wherein the investor buys a call option with a higher strike price and sells a call option with a lower strike price but with the same expiry date), he also seems to have sold 1,000 of the 18-Jun-21 $20.00 call options on CLOV for $5.27 per share, which is an inflow of $527,000. His total inflow for this Bear Call Spread Strategy was $46,000.
CLOV – Bear Call Spread Options Strategy
A Bear Call Spread strategy is typically used to generate premium income based on a trader’s bearish view of a stock or index. He seems to be anticipating that the price of the stock would not cross above $20.00 until 18-Jun-21. CLOV’s last close was $16.92.
Trade #2: Trader Just Bet $1,773,000 That Workhorse Group Inc. (NASDAQ: WKHS) Will Have a Significant Move in Either Direction in 5 Weeks.
On Tuesday, June 08, 2021, a “smart money” trader seems to have bought 1,500 of the 16-Jul-21 $25.00 call options on WKHS for $1.76 per share. Her outlay was $ 264,000 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-Jul-21 $25.00 put options on WKHS for $10.06 per share, which is an outlay of $1,509,000. Her total outlay for this Long Straddle Strategy was $1,773,000.
WKHS – Long Straddle Options Strategy
WKHS will need to rise to $36.82 for the call option trade to break even — around a 118% return from the current price of $16.90. And then for every $1 the stock rises above $36.82, our “smart money” trader will make $150,000!
WKHS will need to decline to $13.18 for the put option trade to break even — around a 22% return from the current price of $16.90. And then for every $1 the stock decreases below $13.18, 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 5 weeks.
Trade #3: Trader Just Bet $1,500,000 That iShares MSCI Japan ETF (NYSE: EWJ) Will Have a Significant Move in Either Direction in 1 Week.
On Tuesday, June 08, 2021, a “smart money” trader seems to have bought 60,000 of the 18-Jun-21 $70.00 call options on EWJ for $0.23 per share. His outlay was $1,380,000 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 60,000 of the 18-Jun-21 $65.00 put options on EWJ for $0.02 per share, which is an outlay of $120,000. His total outlay for this long strangle strategy was $1,500,000.
EWJ – Long Strangle Options Strategy
EWJ will need to rise to $70.25 for the call option trade to break even — around a 2% return from the current price of $68.99. And then for every $1 the ETF rises above $70.25, our “smart money” trader will make $6,000,000!
EWJ will need to decline to $64.75 for the put option trade to break even — around a 6% return from the current price of $68.99. And then for every $1 the ETF decreases below $64.75, our “smart money” trader will make $6,000,000!
He seems to be anticipating the underlying ETF to have a significant move in either direction within the next 1 week.
Trade #4: Trader Just Bet $3,730,000 That AMC Entertainment Holdings Inc. (NYSE: AMC) Will Have a Significant Move in Either Direction in 1 Week.
On Monday, June 07, 2021, a “smart money” trader seems to have bought 1,000 of the 18-Jun-21 $60.00 call options on AMC for $17.90 per share. Her outlay was $1,790,000 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 1,000 of the 18-Jun-21 $60.00 put options on AMC for $19.40 per share, which is an outlay of $1,940,000. Her total outlay for this Long Straddle Strategy was $3,730,000.
AMC – Long Straddle Options Strategy
AMC will need to rise to $97.30 for the call option trade to break even — around a 97% return from the current price of $49.34. And then for every $1 the stock rises above $97.30, our “smart money” trader will make $100,000!
AMC will need to decline to $22.70 for the put option trade to break even — around a 54% return from the current price of $49.34. And then for every $1 the stock decreases below $22.70, our “smart money” trader will make $100,000!
She seems to be anticipating the underlying stock to have a significant move in either direction within the next 1 week.
Trade #5: Trader Just Bet $354,000 That Cleveland-Cliffs Inc. (NYSE: CLF) Will Rise 29% in 9 Weeks.
On Wednesday, June 09, 2021, a “smart money” trader seems to have bought 3,000 of the 20-Aug-21 $25.00 call options on CLF for $3.90 per share. His outlay was $1,170,000 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 3,000 of the 20-Aug-21 $30.00 call options on CLF for $2.72 per share, which is an inflow of $816,000. His total outlay for this Bull Call Spread Strategy was $354,000.
CLF – Bull Call Spread Options Strategy
CLF needs to rise to $26.18 for the call option trade to break even – a 13% return from the current price of $23.22. Then, for every $1 the stock rises above $26.18, our “smart money” trader will make $300,000!
He seems to be anticipating the underlying stock to surge until $30.00, which is a nearly 29s% return from the current price of $23.22.
Happy Trading!
— Trades of The Day Research Team