Hey Traders,
It was a bloodbath of a week on the markets … the S&P 500 (Ticker: SPX) closed out its FIFTH weekly loss in a row … ouch.
But it wasn’t all bad news … for me, anyway.
I closed out three winners using the same simple “trick” I’ve been using to profit for months.
It’s almost becoming my “signature move” you could say …
It’s following the market’s biggest money flows, and using them to inform my own trading.
But there is a catch!
If you just browse market money flows and take them at surface value, there’s a lot you could be missing.
After all, if a block of 10,000 puts is traded at the same time a purchase of 1,000,000 shares goes through …
If you only see the puts, you’re only seeing (the wrong) half of the story!
So let’s dissect how these three trades came to be … and how they ended up green in a sea of red!
BP Amoco (Ticker: BP)
It was mid-March, and oil prices were slowly coming off recent highs …
Add to that BP’s ties to Russia, and the war with Ukraine still fresh in the headlines …
It definitely caught my eye when I noticed some big bullish money crossing the tape in the oil company’s pits!
Early in the day, this trader purchased a total of 12,000 May 30-strike calls …
While simultaneously selling the same number of 24-strike puts!
This is what is known as a risk reversal, which essentially creates a synthetic long.
This trader’s initial out-of-pocket cost came in right around $400,000 … if they had purchased the calls outright, the required outlay would have been quite a bit more … about $1,320,000.
However, since I wasn’t planning on buying 12,000 contracts … I decided not to open myself (and my Big Money Flow members) up to the risk of selling puts.
So after alerting my Big Money Flow members (or at least the ones who didn’t see this all go down live during the Big Money Flow show) about my intention, I bought six BP May 30-strike calls for $1.19.
I knew I was looking to start taking profits around $2.00, so when my calls hit over $1.90, I knew I wanted to lock in some profits while I had them.
I closed three of my six contracts six trading days later for $1.92 … not bad.
But there were still three more contracts racking up gains!
The very next day, I sold two more contracts for $2.25!
And the day after, I attempted to close out the third and final contract at $2.30.
But we ran into an issue, and my order didn’t fill.
I decided to hold on, and see what happened next.
Unfortunately, “what happened next” was BP falling lower and only winding marginally higher over a couple of weeks …
And then falling again, even lower!
But the first 80% of the trade had gone so well, and we had plenty of time left for the final contract to play out.
So I held on … and finally on Tuesday, I sold the final call contract for $1.50.
No, it wasn’t the $2.30 I initially hoped … but it was still a profitable close!
How’s it going for Big Money?
While I can’t be sure … it would appear as though they’re still letting their calls ride.
Their puts are somewhat of a mystery …
Days after I closed out the first contracts of our calls, there was quite a bit of heavy volume on the put contracts Big Money had purchased …
But the open interest doesn’t reflect a massive close-out, so while it is quite possible they bought back their puts at a much lower price (we’re talking $0.22, versus the $0.77 price sold!)…
We may never know.
But we don’t have to.
All I need to know is that I banked a +65% win just from following Big Money’s lead!
Ares Capital Corporation (Ticker: ARCC)
Through much of March and April, ARCC was on a tear higher, stopping only briefly to catch its breath during the early days of April …
Which is when Big Money made quite a bearish move!
Actually, it wasn’t a single trade, but two trades over the course of two days that showed me Big Money really had some conviction that ARCC’s time in the sun would be coming to an end …
First, on Thursday, we saw 15,000 May 20-strike puts purchased for $0.35. That’s an outlay of $525,000 betting that ARCC would be giving back nearly all of its late-March gains …
The very next day, I saw yet another Big Money move indicating ARCC shares would be taking a turn for the worse …
This trader bought 10,000 contracts of the May 21-strike puts for $0.46, requiring a total outlay of $460,000.
Assuming this was done in conjunction with the trade the day before, that’s some no-so-subtle cash supporting this pessimism.
Naturally, I was intrigued …
And I wanted in.
So I bought 10 of the May 20-strike puts for $0.45 myself.
Just in time to watch ARCC shoot higher …
Was following this Big Money trade a mistake?
After all, even Big Money gets it wrong sometimes …
But with several weeks left to expiration, I held on …
And wouldn’t you know it …
Some breaking news and an earnings report weighed on ARCC shares like a brick …
And I was able to close out of my trade for $0.90 – a 100% gain!
By following Big Money’s wisdom … I was able to double my money.
(And my Big Money Flow members followed along for that one, too!)
Energy Transfer LP (Ticker: ET)
That brings me to my third and final win of the week …
A nice little piggyback on another energy stock, ET.
After a monumental run higher, ET had hit a stumbling block in late April.
The shares had toppled from their three-year highs, and on the day this trade took place, they continued to topple even more.
However, according to Big Money, ET had gas left in the tank … and they wanted ET to put the pedal to the metal soon!
This trader purchased a block of 25,000 May 6 12-strike calls for $0.09. This would put ET just over its near-term peak, and (hopefully) onto a new string of multi-year highs.
So on the same day, I bought 10 ET May 11-strike calls, paying $0.40.
Notice I paid a little extra, but by buying the regular May expiration term, I gave my trade two additional weeks to play out …
Which came in quite handy!
The very next day I sold half of my calls for $0.65 – +62%!
Not a bad overnight return …
But I still had half of my position left to ride out.
And while ET didn’t make its move immediately …
Earlier this week, the company announced an 18-year deal to supply 400k metric tons per year to SK Gas Trading, and spent Tuesday’s trading session on a tear higher.
By the close, the natural gas stock had added on about 4.1% to close at $11.74 …
And I was able to close the final five contracts of my ET calls at $0.76 – bringing my total gain to 76%!
All three of these wins without hours of extra work on my part …
It almost feels like insider trading, except everything is totally legal, and we don’t actually have any insider intel ourselves …
We’re just watching people who know more than we do.
Want to try it yourself?
Grab your own 30-day Big Money Flow membership right here …
And start seeing how easy it can be to let Big Money do the heavy lifting for us!
Your Only Option,
Mark Sebastian