A Fintech Double Down, Or Double Whammy?

Hey Traders,

It may have been a (relatively) calm day on the markets yesterday …

But one payment processing name didn’t share the sentiment!

This stock saw some unusually huge volume crossing the tape …

And it looks like a Smart Money double whammy!

(Though, it’s not all bad news …)

Was this all the same trader … or is this a case of Big Money following Big Money?

Doubling Down

Pagseguro Digital (Ticker: PAGS) is a fintech and digital payment company that has gotten battered over the last several weeks …

Between releasing disappointing preliminary Q3 numbers, new regulatory fears, and concerns about inflation, PAGS shares shed nearly 50% between their late August high of $61.65 and their Monday low of $31.10.

While the shares had a strong trading day on Tuesday after Goldman Sachs noted the recent sell-off may be “overdone,” but even a +14% day didn’t do much to soothe recent burns …

And in PAGS pits, Smart Money was quick to make some moves …

Minutes after noon, one trader sold a block of 4,000 October 37.5-strike calls for $0.75 — likely closing out a position that unfortunately looks like it won’t be in-the-money by the time Friday rolls around.

While they were able to recoup $300,000 in premium on that closeout, they also opened a pair of bull call spreads that seemed to say they weren’t done chasing the 37.5-strike just yet …

First, they opened up a November 37.5-45 call spread, paying $2.65 for 2,000 contracts of the November 37.5-strike calls, and selling the same number of contracts of the 45-strike calls for $0.70.

While the sale of the 45’s helped reduce the initial outlay required, this is still a hefty $390,000 outlay — wiping out the premium received from their October sale, plus a little extra.

Of course, they weren’t done yet …

They also opened up a January 2022 37.5-47.5 call spread, this time more than doubling down, and selling 5,000 contracts of the 47.5-strike calls for $1.20, and paying a handsome $4.00 for the same amount of January 2022 37.5-strike calls!

That’s a $1.4 million outlay, even with the 47.5-strike sold …

Smart Money seems to think 37.5 is the magic number … 

Second Chances?

This wasn’t the only interesting action happening in PAGS pits. 

Just four minutes later, another trader also made an adjustment to their PAGS position.

They’re remaining bullish … but tempering their expectations.

In this trade, the Smart Money trader sold 25,000 contracts of the January 2023 62.5-strike calls for $2.10.

This brought in a whopping $5,250,000 …

Which the trader promptly used to help finance the purchase of even more January 2023 calls — specifically, paying $4.48 for 26,104 contracts of the 50-strike calls.

Without the $5.25 million in premium received, an outright purchase of these lower-strike calls would have cost the trader $6,212,752. Instead, their out-of-pocket cost was a mere $962,752.

They did lower their breakeven price significantly, though …

So it seems like Smart Money is staying stubbornly bullish on the in-pain payment processing stock.

Of course, the interesting question is …

Was this one Smart Money trader doubling down, or was this a case of “Big Money begets Big Money”?

Often, when a Big Money trader sees another Big Money trader targeting a stock, they’ll take their chances and jump in as well … (see, even Smart Money follows Smart Money!)

Hopefully positive Q3 results and the absence of additional regulatory hurdles will help the shares reclaim their former glory …

In which case, these two traders will likely rake in a healthy profit.

Your Only Option,

Mark Sebastian

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