One of the most interesting “smart money” trades we came across yesterday was with Nvidia Corporation (NASDAQ: NVDA).
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 $5,514,180 that NVDA Will Continue to Climb in the Next 12 Weeks
On Tuesday, October 26, 2021, a pro trader seems to have bought 798 of the January 21, 2022, $180 call options on NVDA for $69.10 per share. Her outlay was $5,514,180.
NVDA – Option Trade
The trade’s breakeven point is at $249.10, meaning that NVDA needs to rise to $249.10 for the call option trade to break even. This is a nearly 1% upside from the stock’s previous close of $247.17. And then for every $1 the stock rises above $249.10, our “smart money” trader will make $79,800!
On analyzing the daily chart of NVDA, the stock seems to have broken out of an ascending triangle pattern (marked as purple color lines). This breakout level, which is near $230, would now act as a strong support area. The stock is also trading above a long-term support area at around $180, which is marked as a blue color dotted line. All this makes it likely our pro trader is bullish on NVDA.
NVDA – 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 January 21, 2022, $180 call options on NVDA for $69.10 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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