Hey Trader,
I’m not one to toot my own horn (much) but I have to say … I kinda killed it this week.
And it wasn’t mega cap earnings, or the volatile market that handed me these wins.
Actually, there was one simple thing that helped me spot these trades …
This is something that I see every day … and it has been the key to a dozen of my best trades so far this year.
The secret to these three wins is Big Money.
No, not spending Big Money …
Big Money traders spend millions of dollars every year, researching stocks, paying for top trading tools, and hiring industry experts to give their trading an edge.
So when they make a big, decisive move … it’s worth taking a second look at, because a lot of the time, they’re onto something …
But … Big Money cares more about stock moves than making the “best” option trade. They’re fine with “good enough” when it will still make them tons of money. They just want their trade filled ASAP, and if they leave a little on the table, so be it.
Which leaves plenty of room for traders like you and I to come in and make the trade they “should” have made.
And for myself and my Big Money Flow members … it’s been working out quite well.
We’ve closed out a dozen winners so far this year … and we closed out three of those during the first half of this trading week alone!
Here’s how we did it.
CF Industries $2.5 Million Call Spread
During my Big Money Flow show on January 11, I took note of some Big Money flow on CF Industries (Ticker: CF) …
The shares had been sliding lower in the previous days, dropping from a high of $74.77, and were trading at $68.31 when I spotted this trade.
But in spite of the recent downward trend … Big Money was placing an aggressive bullish bet …
The Smart Money customer purchased 12,000 of the May 75/90-strike call spreads, buying the 75-strike calls for approximately $3.55-$3.70, and selling the 90-strike calls for around $1.00-$1.10.
The cost of this trade was approximately $2,550,000, taking into account the $1,800,000 premium received from selling the 90-strike calls (full disclosure, this trade was actually composed of quite a few smaller trades, so this number isn’t exact).
What’s also notable is that CF’s typical average daily volume is around the 6,000 range … so this trade alone accounted for four times CF’s average daily volume!
Now that’s a mighty bullish bet that someone is willing to lay down a cool $2.55 mil on … and I figured it was worth my time to take a closer look.
However, when I was looking for a way to piggyback this trade for my own wins, the May term seemed a bit expensive.
I also noted that CF would likely be reporting earnings in the days leading up to February expiration, although that hadn’t yet been priced into the options.
I decided to take a chance and grab the trade that I saw as the best bargain, and I purchased four contracts of the February 70-strike calls for $2.74.
This wasn’t necessarily an “instant gratification” trade, but nonetheless, just nine trading days later on January 25, I closed out half of my position for $3.80, almost a 39% increase.
Let me remind you that January was relentlessly volatile …
And with the market in such a state of flux, while I may have normally considered holding out for even bigger gains … I wanted to lock in some profits while I had them.
But … two and a half hours later, my calls were now trading for $4.80, so I closed out one of my remaining two contracts for a 75% profit.
The last one I was content to let ride … until it achieved a 100% gain, and I closed out the final part of my position this past Tuesday at $5.60.
My total gain on the trade came out to +64% … quite a solid win, especially when you consider the state of the market over that same time period …
And when you consider that it took me just minutes to spot and make this trade!
I didn’t need to spend hours researching CF, or debating trade terms and strike prices …
I just saw what Smart Money had done, and set up a trade that I liked even more!
And that wasn’t my only closeout on Tuesday …
NRG Energy Big Call Buy
After a late-year rally, NRG Energy (Ticker: NRG) semed ready to give back recent gains, sliding from nearly $43 to trade at just $38.56 on January 21 …
So that’s what made me look twice when I spotted this trade …
This trader came in and purchased 15,000 contracts of the January 2023 50-strike calls for $1.80, or a total of $2,700,000.
But if you ask me, the January 2023 calls were really kind of expensive … on top of the fact that they were nearly $12 out of the money!
Upon closer inspection, I found I liked the April term better, which still gave me several months of time for my trade to play out, and the options pricing offered a much better bang for my buck.
I purchased five contracts of the April 40-strike calls for $1.55 – though I would have gladly paid as much as $1.65 to make this trade.
And this past Monday, I closed three of my five contracts at $2.30 – a nice 48% gain, and just below my initial target of $2.50.
However, the next day, I noticed the trade was starting to head south …
I had two choices … I could hold on …
Or I could take my profits while I had them … which is what I did.
I closed out the final two contracts for $1.75, bringing my total gain to 34%.
FCX’s Poppin’ Pits
During the second half of January, copper stock Freeport-McMoRan (Ticker: FCX) was getting hammered, dropping from $46.20 to as low as $34.94 …
Which made the multitude of bullish Big Money bets I was spotting all the more interesting!
After all, the shares were at a multi-month low, even threatening to hit a new annual low.
Yet the pits were popping with big volume, most of it looking for upside to come!
Of note was big volume on the March 37/42-strike call spread, and March 38/45-strike call spread. Of course, there were also plenty of outright call buyers, snapping up all the contracts they could get their hands on (or so it seemed).
But as I looked closer, I noticed that these traders were paying too much!
While most of the big volume targeted standard March expiration, the March 11 expiration was actually significantly cheaper … which meant I’d be able to get more favorable pricing on even better strikes!
Which is exactly what I did, purchasing four FCX March11 36-strike calls for $2.39 on Friday, January 28, around noon …
And by Tuesday morning, I closed out half of my position for $3.80, a 59% gain … and a few hours later, I closed another contract at $4.10, a 71% gain.
Then, just one day later on Wednesday, I closed out my final contract at $4.45 – an 86% gain!
Overall, this was a 69% win …
And again, I didn’t have to spend hours combing the market, or analyzing company fundamentals, or whatever else people do when they’re trying to find a trade.
Big Money has already done all of that. That’s why they’re willing to sink millions of dollars into these trades!
All that’s left for me to do is spot the trade, check the message it is trying to send (which can be quite tricky in some cases …), and then make my own (even better!) trade.
That’s the power of Big Money Flow …
And if you’d like to try it for yourself, now you can.
Your Only Option,
Mark Sebastian