Hey Trader,
Whole milk, skim milk, 2% milk, goat milk, soy milk, almond milk, rice milk, coconut milk, cashew milk, hemp milk …
Did you know they even have quinoa milk now?!
Is there anything they can’t milk these days?
With the emphasis on “green” alternatives, the milk market has been exploding with new options as people look for more eco- and health-friendly options to add to their cup of morning java, or pair with their favorite cookies …
And it looks like Smart Money is getting in on the milk game …
But what are they adding to their cereal?
Not Crying Over Oat Milk
After IPO’ing at $17 per share on May 20, 2021, the journey hasn’t been smooth for oat milk stock Oatly (Ticker: OTLY).
In fact, the shares have more or less been in a downward spiral after popping briefly above $29, and now sit at just $6.83, in spite of a median analyst price target of $15.
Big Money seems to want a big cup of whatever OTLY is serving up, though …
Last Thursday, this notable Big Money bet crossed in OTLY’s pits, in spite of the shares closing more than 1% lower on the day at just $7.72:
This Big Money trader opened up a 1×2 call ratio spread, buying 10,000 January 2023 7.5-stike calls for $2.80.
While buying the 7.5-strike calls outright would have cost this trader $2,800,000, they instead chose to sell 20,000 contracts of the January 22.5-strike calls for $0.52, which brought in $1,040,000 to help cover the cost of the trade.
Now, this is an interesting play. There is quite a bit of profit potential here, with this trade achieving maximum profits if OTLY sits at $22.50 by the time these expire one year from now. Not taking into account fees and commissions, this trader stands to make $13.24 per contract, which works out to a whopping $13,240,000.
However, should OTLY skyrocket back to its post-IPO highs within the next 12 months, this trader is looking at theoretically unlimited risk, given they’ve sold twice the amount of calls as they purchased.
But I’m not particularly interested in whether this trader will make their maximum profit or not …
Instead, I’m interested in the fact that they laid out a total of $1,760,000 to make a bullish bet on a stock that has more or less been heading straight down for months …
Do they have an inside line on something good to come?
That isn’t the only notable Big Money action in OTLY’s pits over the last week …
On Tuesday, with OTLY closing 5.5% lower on the day at $7.00, another bullish bet crossed the tape – this time, a simple bullish call spread.
Interestingly, this trader also seems to like the 7.5-strike calls … but the timeframe this trade is working with is significantly shorter than the one above, targeting the upcoming March expiration.
This trade involved the purchase of 10,000 March 7.5-strike calls for $1.05 – a purchase worth $1,050,000.
However, they also sold the same number of the March 12.5-strike calls for $0.15, which helped lower the required outlay to “just” $900,000.
This bullish bet gives OTLY just two months to turn its downtrend around, and regain at least some of what it has lost.
It is interesting to note that these four trade legs account for a significant portion of the second (March 7.5-strike calls), third (January 2023 22.5-strike calls), fifth (March 12.5-strike calls), and sixth (January 2023 7.5-strike calls) most populated contracts in OTLY’s pits.
Big Money is definitely watching OTLY closely …
And it will be interesting to see if perhaps they’re onto something with this whole oat milk thing…
Your Only Option,
Mark Sebastian