What if you could mimic the moves of some of the best-informed traders on the planet? That’s the idea behind our special trading series focused on what we “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, one of the most interesting “smart money” trades we came across this past Friday was with Alibaba Group Holding Ltd. (NYSE: BABA).
Alibaba Group Holding Limited, also known as Alibaba Group and Alibaba.com, is a Chinese multinational technology company specializing in e-commerce, retail, Internet, and technology.
Trader Just Bet $1,606,000 That Alibaba Group Holding Ltd. (NYSE: BABA) Will Rise 39% in 17 Weeks
On Friday, August 20, 2021, a “smart money” trader seems to have bought 2,200 of the 17-Dec-21 $180.00 call options on BABA for $9.85 per share. Her outlay was $2,167,000 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), she also seems to have sold 2,200 of the 17-Dec-21 $220.00 call options on BABA for $2.55 per share, which is an inflow of $561,000. Her net outlay for this Bull Call Spread Strategy was $1,606,000.
BABA- Bull Call Spread Options Strategy
BABA needs to rise to $187.30 for the call option trade to break even – around a 19% return from the current price of $157.96. Then, for every $1 the stock rises above $187.30, our “smart money” trader will make $220,000!
Based on the strike price of the call option she sold, she seems to be anticipating the underlying stock to surge until $220.00, which is a nearly 39% return from the current price of $157.96.
Happy Trading!
— Trades of The Day Research Team