A Uranium Triple-Header, Or A Hole-In-One?

Hey Traders,

After the holiday weekend, Tuesday’s session kicked off with quite a bit of big buying volume in the pits!

It seems like the shortened trading week isn’t slowing Big Money traders down …

And it won’t be slowing me down, either – as you’ll see during Thursday’s special event, where I’ll not only be talking about the one thing you can do differently to start trading more like a professional, but I’ll also be supplying some of my best trades for the rest of 2021!

Sign up here if you haven’t claimed your spot yet.

One name in particular caught my eye in terms of Big Money crossing the line …

This specific uranium stock has been lighting up over the last week, and I’ve been eyeing it myself for a few days now …

Either one very-deep-pocket trader, or several quite-deep-pocket traders have wanted to slice their own piece of yellow cake …

And as a result, there was some massive volume floating around in these option pits …

Here’s how Smart Money may be playing the same sentiment in different ways …

A Piece of Yellow Cake

Cameco Corp. (Ticker: CCJ) has been getting some major attention from traders lately …

Chart courtesy StockCharts

I mean, just check out that recent buying volume!

Uranium stocks have been hot, thanks in large part to the creation of Sprott Physical Uranium Trust – a commodity fund that buys and holds physical uranium.

As the world’s largest publicly traded uranium company, it stands to reason that CCJ would enjoy quite a bit of tailwinds from the sector-wide boost.

Additionally, CCJ in particular has benefitted from a handful of bullish analyst notes, and yesterday hit its highest price since July 2011!

With CCJ spot prices skyrocketing, it’s not exactly surprising that options traders have been piling on.

Open interest in CCJ pits is at an annual high, and Tuesday saw four times the amount of normal daily volume cross the tape – or a total of 309,000 contracts traded.

In particular, three specific hefty spread trades caught my eye …

The first to cross the tape was the December 25-strike and 30-strike call spread.

This trader sold 15,000 of the December 25-strike calls for $1.58, bringing in a whopping $2,370,000 …

Which they then used to purchase 15,000 contracts of the December 30-strike calls for $0.73, or a total purchase price of $1,095,000.

This call credit spread – or bear call spread – tells me not that this trader is expecting CCJ to rocket to $30 … but that they expect the currently-on-fire uranium producer to stay below the $25 mark by December expiration.

If that is the case, they’ll pocket the $1,275,000 credit ($2,370,000 – $1,095,000) received as profit.

However, they have quite a bit on the line – should CCJ surge to the $30 mark, they could be on the hook for $6,225,000 ($5 difference in strike minus the $0.85 cost of the spread, multiplied by 15,000 contracts and 100 options per contract).

To me, this speaks volume about someone’s certainty that CCJ’s rally will be contained …

Now, interestingly, about an hour later another trader made the exact same trade: purchasing 12,500 of the December 30-strike puts for $0.84, and selling 12,500 of the December 25-strike calls for $1.74.

I have to wonder if this was the same trader doubling down (or wasn’t able to get their full order filled at their initial price), or simply two sources of big smart money in agreement …

If it’s the same trader, that means their total trade brought in a credit of $2,400,000, which will be theirs to keep if CCJ can keep below $25 through expiration!

Now, those weren’t the only – or even the largest, if they were indeed separate trades – trades on CCJ in the pits on Tuesday …

About an hour after the previous two trades crossed the tape, another trader purchased a block of 18,800 December 21-strike calls for $3.35. That’s a $6,298,000 outlay, partially subsidized by the sale of 18,800 contracts of the December 24-strike calls for $1.97 (bringing in $3,703,600), bringing their total cost to “only” $2,594,400.

Now, you might notice this is a call debit spread, or a bull call spread.

Does this directly contradict the “smart money” trade laid out above?

Do we have a duel of the Deep Pockets?

Actually, no. These bullish and bearish bets are actually in agreement.

The bull call spread trader is simply banking on CCJ trading above $21, but below $24 by December expiration.

Meanwhile, the other trader(s) are simply saying CCJ will remain below $25.

Really, the same trader could be responsible for all three trades!

If so, that’s a very large, specific bet that CCJ will wind more-or-less sideways over the next several months …

If it is indeed the same trader, the $2,400,000 premium received from the bear call spread would nearly totally cover the $2,594,400 cost of the bull call spread, giving this trader a huge amount of trading power at quite a minimal cost.

They will likely be watching closely to see how much more energy this uranium rally has …

Speaking of “watching closely,” don’t forget to attend Thursday’s special live event! The Option Pit Crew will be there to dish on the “smart money” advantage you can take for yourself, and we’ll even be giving out some event-exclusive trades!

Don’t forget to register here to attend!

Your Only Option,

Mark Sebastian

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.