One of the most interesting “smart money” trades we came across yesterday was with
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 Made $9,311,580 Betting that QQQ Trust Series 1 (NASDAQ: QQQ) will Stay Above $355 For the Next 2 Weeks
On Tuesday, September 28, 2021, a pro trader seems to have sold 16,110 of the October 15, 2021, $355 put options on QQQ for $5.78 per share. His inflow was $9,311,580.
QQQ – Option Trade
QQQ will need to stay above $355 in the next 2 weeks so that the trader can buy back the 15-Oct-21 $355.00 put options for next to nothing. And then our “smart money” trader will get to keep the $9,311,580 he had received when selling the 15-Oct-21 $355.00 put options.
On analyzing the chart of QQQ, the stock seems to be trading within an upward sloping trend channel (marked in red color lines) and is currently nearing the support level of the lower rail of the trend channel. The stock is also trading above gap support (near $355, marked as a purple color dotted line). All this makes it likely our pro trader is bullish on QQQ.
QQQ – Daily Chart
This lends credence to our conclusion that the pro sold these put options, as opposed to buying them.
If you agree and would like to mimic this trade, here’s how:
Sell to open the October 15, 2021, $355 put options on QQQ for $5.78 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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