One of the most interesting “smart money” trades we came across yesterday was with Netflix Inc. (NASDAQ: NFLX).
If you’re new here, a “smart money” trade is a relatively large volume option trade most likely made by a pro trader. The idea is to analyze unusual options activity, identify an interesting “smart money” trade, and then make our best guess as to:
- Which direction the trader thinks the stock is headed
- How much they think it will rise (or fall), and
- In what time frame this will all happen.
If we like what we see after putting all these pieces together, we can mimic the “smart money” trade (on a smaller scale), and potentially ride alongside our pro trader to profits. With all this in mind…
A Pro Trader Just Bet $1,905,800 that NFLX will Rise in the Next 6 Weeks
On Wednesday, September 01, 2021, a pro trader seems to have bought 520 of the October 15, 2021, $550 call options on NFLX for $36.65 per share. Her outlay was $1,905,800.
NFLX – Options Trade
The trade’s breakeven point is at $586.65, meaning that NFLX needed to rise to $586.65 for the call option trade to break even. This is around 1% upside from the current price of $582.07. And then for every $1 the stock rises above $586.65, our “smart money” trader will make $52,000!
On analyzing the chart of NFLX, the stock seems to have broken out of a long-term consolidation area (marked as a blue color rectangle) and is also trading above a strong resistance-turned-support area (marked as a green color dotted line). All this makes it likely our pro trader is bullish on Netflix Inc.
NFLX – Daily Chart
This lends credence to our conclusion that the pro bought these call options, as opposed to selling them.
If you agree and would like to mimic this trade, here’s how:
Buy to open the October 15, 2021, $550 call options on NFLX for $36.65 or better.
As always, depending on your risk appetite, do remember to set a stop-loss for the options trade to avoid significant losses.
Happy Trading!
— Trades of The Day Research Team
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