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Hey Traders,
Unusual volume may very well be my favorite ways to find my trades.
It pays off quite literally … and it’s always fun when you can beat Big Money at their own game!
Which is precisely what happened to this Big Money trader, who got a little too greedy …
Take a look at Big Money’s big mistake.
Sick Trade Turns Into A Sick Trade
Chances are, you’ve seen Merck & Co. (Ticker: MRK) making headlines over the past year, especially related to its COVID-19 treatment, molnupiravir, which made quite a splash when it was first brought to market.
Of course, the drug has lost some of its shine since then as other treatments have also rolled out, and clinical trials cast doubt on just how effective Merck’s new drug actually was.
Suffice to say … MRK has had a rather choppy ride on the charts!
But after bottoming out in mid-February, the shares have shot up like a rocket, buoyed by good drug and revenue news.
So it wasn’t a surprise then when I saw Big Money make its move …
On Friday, April 1 as MRK popped 1.8% to close at its highest close since early November ($83.52), Big Money bet big on MRK’s continued move higher.
This trader bought 10,760 in-the-money April 82.5-strike calls for $1.08. Given MRK’s finish on the day, these calls were already almost profitable the same day this trader paid $1,162,080 to buy them!
Then just a few days later on Tuesday, this same trader made an adjustment to their position …
MRK had continued its recent uptrend, closing on Tuesday, April 5 up 0.3% at $83.72, but the shares touched an intraday high of $85.43, yet another multi-month high for the shares.
As MRK was trading right around that high, this trader decided to collect some profits while rolling into a new, higher strike position.
After paying just $1.08 for their first round of 82.5-strike calls, just days later this trader closed out their position of 14,720 82.5-strike calls for $2.96 – that’s quite a profit in just a little over two trading days!
Then, the trader purchased the same number of 85-strike calls for $1.20.
After seeing this, my Big Money Flow members and I decided we want to hop on board the MRK profit train.
So less than an hour after this trader rolled their own position, we decided to buy some MRK April 29 85-strike calls for $1.76.
Why the longer term and higher price?
To be blunt, they were actually a better bargain. By paying just $0.56 more, we were able to give this trade two extra weeks of time to play out …
And those two weeks just so happen to include MRK earnings scheduled on April 28!
Of course, my Big Money Flow members and I didn’t need to wait nearly that long for our position to become profitable …
On Thursday, two days after buying four contracts of the April 85-strike calls for $1.76, I closed two of my contracts for $2.75 … and just an hour and a half later, I closed a third for $3.25!
After locking in some solid profits, I decided to let the last contract ride, and see if MRK could pick up a few extra bucks for us …
And this past Monday, I closed out the final call at $4.10, bringing our total gain on the position to 83%!
Unfortunately, our Big Money buddy did NOT make the same moves on their position, and with time to expiration quickly draining away, they were watching their contracts lose money as ours skyrocketed!
So on Wednesday, they decided they did, in fact, need to buy some more time …
They rolled their position from the April 85-strike calls to the May 87.5-strike calls … buying an extra month for their premonition to play out, but also requiring a not-insubstantial $2.50 MRK rally more for the contracts to hit the money.
And after selling their April-dated calls for $0.56, and paying $1.56 for their new calls, they had to shell out an additional $1,460,000!
Yikes.
This is why I don’t blindly follow Big Money.
Yes, they have access to expensive tools, teams of researchers, and expert insight.
But a lot of times, they don’t care about making the best trade possible … they just want a trade filled, and they want it filled now!
And as you can see … sometimes it works out for them, like it did the first time.
But it doesn’t always.
And just because Big Money is succumbing to greed, or falling victim to unfortunate price action doesn’t mean we have to.
Sometimes it literally pays to think for yourself, and to take the gains when you have them!
And if you’d like to join a group that regularly beats Big Money at its own game …
Your Only Option,
Mark Sebastian
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