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 $3,332,705 That Oracle Corporation (NYSE: ORCL) Will Have a Significant Move in Either Direction in 4 Weeks.
On Tuesday, June 15, 2021, a “smart money” trader seems to have bought 2,415 of the 16-Jul-21 $95.00 call options on ORCL for $0.15 per share. Her outlay was $36,225 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 2,415 of the 16-Jul-21 $95.00 put options on ORCL for $13.65 per share, which is an outlay of $3,296,480. Her total outlay for this Long Straddle Strategy was $3,332,705.
ORCL – Long Straddle Options Strategy
ORCL will need to rise to $108.80 for the call option trade to break even — around a 41% return from the current price of $77.08. And then for every $1 the stock rises above $, our “smart money” trader will make $241,500!
ORCL needed to decline to $81.20 for the put option trade to break even. And then for every $1 the stock decreases below $81.20, our “smart money” trader will make $241,500!
She seems to be anticipating the underlying stock to have a significant move in either direction within the next 4 weeks.
Trade #2: Trader Just Made $90,000 Betting That iShares iBoxx $ High Yield Corporate Bond ETF (NYSE: HYG) Will Stay Bullish For The Next 4 Weeks.
On Monday, June 14, 2021, a “smart money” trader seems to have bought 10,000 of the 16-Jul-21 $85.00 put options on HYG for $0.23 per share. His outlay was $230,000 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 10,000 of the 16-Jul-21 $86.00 put options on HYG for $0.32 per share, which is an inflow of $320,000. His total inflow for this Bull Put Spread Strategy was $90,000.
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 $86.00 until 16-Jul-2021. The EFT’s previous close was $87.41.
Trade #3: Trader Just Made $425,600 Betting That Financial Select Sector SPDR Fund (NYSE: XLF) Will Stay Bearish For The Next 2 Weeks
On Wednesday, June 16, 2021, a “smart money” trader seems to have bought 13,300 of the 02-Jul-21 $39.50 call options on XLF for $0.11 per share. Her outlay was $146,300 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), she also seems to have sold 13,300 of the 02-Jul-21 $37.50 call options on XLF for $0.43 per share, which is an inflow of $571,900. Her total inflow for this Bear Call Spread Strategy was $425,600.
XLF – 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. She seems to be anticipating that the price of the ETF would not cross above $37.50 until 02-Jul-21. XLF’s last close was $37.20.
Trade #4: Trader Just Bet $250,000 That Itau Unibanco Holding SA ADR (NYSE: ITUB) Will Rise 22% in 4 Weeks.
On Monday, June 14, 2021, a “smart money” trader seems to have bought 50,000 of the 16-Jul-21 $7.00 call options on ITUB for $0.08 per share. His outlay was $400,000 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 50,000 of the 16-Jul-21 $8.00 call options on ITUB for $0.03 per share, which is an inflow of $150,000. His total outlay for this Bull Call Spread Strategy was $250,000.
ITUB – Bull Call Spread Options Strategy
ITUB needs to rise to $7.05 for the call option trade to break even – an 8% return from the current price of $6.54. Then, for every $1 the stock rises above $7.05, our “smart money” trader will make $5,000,000!
He seems to be anticipating the underlying stock to surge until $8.00, which is a nearly 22% return from the current price of $6.54.
Trade #5: Trader Just Bet $9,050,000 That AMC Entertainment Holdings Inc. (NYSE: AMC) Will Have a Significant Move in Either Direction in 9 Weeks.
On Monday, June 14, 2021, a “smart money” trader seems to have bought 2,000 of the 20-Aug-21 $50.00 call options on AMC for $26.26 per share. Her outlay was $5,252,000 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 20-Aug-21 $50.00 put options on AMC for $18.99 per share, which is an outlay of $3,798,000. Her total outlay for this Long Straddle Strategy was $9,050,000.
AMC – Long Straddle Options Strategy
AMC will need to rise to $95.25 for the call option trade to break even — around a 73% return from the current price of $55.18. And then for every $1 the stock rises above $95.25, our “smart money” trader will make $200,000!
AMC will need to decline to $4.75 for the put option trade to break even — around a 91% return from the current price of $55.18. And then for every $1 the stock decreases below $4.75, 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 9 weeks.
Happy Trading!
— Trades of The Day Research Team
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