Hey Traders,
It may be a low-volume week on the market, but that doesn’t mean there aren’t some unusual volume trades crossing the tape …
In particular, I noted one Big Money move on an Asian e-commerce stock that was of particular interest …
Not only was the size of this trade quite notable given the usual volume in this stock’s pits …
But it also seems to support some Big Money trades I saw before the holidays …
That also happened to be a trade I piggybacked myself.
Since its IPO in late March, Coupang (Ticker: CPNG) spent months slowly winding lower …
But after the extended downtrend, CPNG seems to have found its footing, but so far has failed to launch higher, and instead has more or less churned sideways …
Although the shares may finally be catching a tailwind after bouncing off the $25 mark earlier this month, CPNG continues to struggle to maintain a breakout above the $30.50 mark., closing at $29.52 on Tuesday.
Does Big Money see a breach of this resistance level in the future?
Not exactly … but they are betting on at least some further upside for the Korean e-tailer in the near future.
This trader opened up a ratio diagonal spread, where the trader sold 8,000 contracts of the December 31 30.5-strike calls for $0.21, or $168,000.
He or she then purchased 5,000 contracts of the January 7 30-strike calls for $0.87. While the outright purchase of these calls would have cost $435,000, the credit for the calls sold brings the cost down to $267,000.
This trade indicates a near-term neutral position, with the trader betting that CPNG won’t be able to decisively break above the $30.50 mark into Friday’s expiration.
However, they are betting that CPNG will be able to make a move higher in the week following … and given the breakeven price of this trade, it looks like they think that pesky resistance at $30.50 may finally fall …
That’s a 4% gain in a little over a week … does CPNG have what it takes?
This trade may not be extremely high dollar, but given CPNG’s typical trading volume, it is definitely worth taking a closer look at.
For example, take a look at the current open interest on the at-the-money strikes, compared to the move Big Money just made …
And compare them to the across-the-aisle open interest on the put side … It’s tumbleweeds!
What’s more, this Smart Money trader is getting a bargain in CPNG’s pits, with CPNG’s 30-day implied volatility in just the fifth percentile of its annual range, indicating options are “on sale” right now.
And, even better, CPNG’s 20-day historical volatility – which indicates how much movement CPNG has actually seen over the last trading month – is actually slightly above its 30-day implied volatility:
This indicates CPNG traders are getting more movement than they’re paying for … and they’re not paying for much!
And like I mentioned, this isn’t the first Big Money move the “Amazon of Korea” has seen in the pits lately …
On Tuesday, December 14 we saw another near-term bullish bet on the stock:
This trader purchased 5,000 contracts of the December 27.5-strike calls for $0.65, along with 7,500 contracts of the December 28-strike calls for $0.40! That’s a total outlay of $625,000.
Then on the following Friday, there were several additional more bullish Big Money moves made on the stock …
Which I went over during my live Big Money Flow shows …
And then piggybacked with my Big Money Flow traders, buying up some January-dated 30-strike calls.
Looking at where Big Money is continuing to position itself …
I’m thinking we made an excellent call to follow in Big Money’s footsteps on this one.
Want to catch the next one?
Find out more about how I trade Big Money Flow right here.
Your Only Option,
Mark Sebastian