On October 6, the chip stocks started to crack.
That same day, somebody spent $13 million on Walmart options, betting the stock would climb from $104 to $120 in 44 days. It got there in seven trading days.
Walmart is now having its best month since 1999.
The fund that tracks consumer staples, the toothpaste, groceries and soda you buy every week, is on pace for its best month since it launched in 1998.
That bet was sitting out in the open, and it told you where the AI money was headed before any headline did.
Once you know how to read a bet like that, you can spot the next one yourself.
It comes down to three things, and the third is the one most people miss.
Where The AI Money Went
Hedge funds spent October cutting the borrowed money they use to juice their bets. When you have to cut, you sell what you own the most of, and this year, that’s AI.
Through last week, the iShares Semiconductor ETF was down more than 15% in October, and the tech sector fund was down about 7%. Over the same stretch, the staples fund (XLP) was up more than 11%, and Walmart was up about 16%, roughly 4% shy of a $1 trillion market value.
That money had to land somewhere.
Bank of America’s clients sold a record $14.8 billion of individual U.S. stocks in the week through October 16, and staples were one of the few places they bought.
How To Read The Bet
Start with the strike. A call option gives you the right to buy a stock at a set price, the strike, before a set date, and it pays off when the stock climbs above that price. A $120 strike tells you exactly where the buyer thinks Walmart is going.
Then look at the date. Forty-four days is a deadline, and nobody puts $13 million behind a target and a deadline on a hunch.
The last piece is what’s tied to the order.
A big call purchase can be one leg of a spread, or a hedge against shares somebody already owns. If the same trader dumped a pile of Walmart stock at the same time, that call is insurance, and it tells you nothing about where Walmart is headed.
Most people see one big order and run with it. It’s like watching one receiver run a route and calling the whole play from that.
The Bet Was Right
Nine days later, on October 15, Deutsche Bank upgraded Walmart to Buy and raised its price target from $113 to $136. Walmart traded as high as $121.38 that day.
Think about it. I had no idea that upgrade was coming, and I still made 122% in two days, because the bet was sitting right there.
I’ve watched order flow for more than 25 years, going back to my days on the Cboe floor, and I’ve spent the last year building a newsfeed of the market’s biggest single-stock option orders. It shows the stock, how much money went in, the exact option, any orders tied to it and whether the bet is bullish or bearish.
Wednesday at 7 p.m. ET, I’m hosting a private training to walk you through it. You’ll see:
- More than 10 big bets I caught in the last year before the news hit
- How I trade oil, chips and retail without becoming an expert in any of them
- The way I’m getting two to three times the upside for a fraction of the cost
- The two stocks I’m watching for a big move in the next five days or less
===>Save Your Seat For Wednesday’s Training
Your only option,
Mark Sebastian
P.S. Walmart wasn’t a one-off. Somebody bet $845,000 that Nokia would rise 30% in 30 days, a move it hadn’t made in years, and it did it in two days. Get on the list for Wednesday at 7 p.m. ET.