Why Use SMO
Below are recent open and closed positions.
Please note that there is always a reason for smart money being put to work.
Why SMO Works
While we never know the reason for ourselves, what we do is act on the unusual activity.
After a position is closed the reason becomes evident.
Let’s take a look at examples of past performance and reasons for their results.
“Traders collected a massive win today on options in Penn National Gaming, Inc (PENN) that expired this afternoon.
On the 12th of April, we identified the purchase of 5,000 May $29 CALLS for $0.80 to $0.95 with shares at $26.54. This was new fresh buying, as open interest in the strike was a mere 889 contracts before the activity appeared.
The CALLS traded for $6.50 this morning, nearly nine times their initial purchase price. The stock rallied 33.6% in the same time frame.
A big move in the share price but nothing compared to the options value. Buying CALLS lock in the price where investors can buy a stock, letting them position for a rally at a very low cost with the potential for significant leverage.
Options carry a lot less risk than owning shares outright because the most that can be lost is the price of the options no matter how far a stock could fall.
Penn National Gaming, Inc (PENN) reported strong quarterly numbers on April 26th.
The casino operator also rallied along with other gambling names after the Supreme Court cleared the way for nationwide sports betting this week.
As clearly shown, traders act on information.
Bears enjoy ($SNAP) Fall results from Snap Inc (SNAP) translated to nice profits for PUT buying traders today.
On the 3rd of April, we noticed the purchase of 2,850 May $13 PUTS in one buy for $1 with shares at $14.02. This was clearly fresh money, as volume was more than twice the strike’s open interest of 1,100 contracts.
These PUTS traded for $2.20 today, more than twice their purchase price. The stock dropped 27.9% in the same time. Snap Inc (SNAP) plunged 21.1% to $11.02.
The social media firm hit an all-time low of $10.89 after missing estimates on the top lines and bottom..
At least one large trader knew that was coming and promptly acted on it.
Chico’s dive sends PUTS soaring higher!
“Bearish position in Chico’s FAS, Inc (CHS) opened, early this year are paying off.
Back on February 17th, we detected the buying of 2,400 August $13 PUTS in one go for $1.15 with shares trading at $14.02. This was clearly a new buy, as open interest was just 60 contracts before it appeared.
Those PUTS sold for $4.10 this afternoon, showing a profit of 250 % The stock dropped nearly 38 percent in the same time frame, a huge move but one that was still way less than that of the options bought.
Chico FAS, Inc (CHS) fell 4.27 percent to $8.75 today, its lowest level since 2009. The women’s clothing retailer, which traded well above $14 as recently as six weeks ago, gapped lower after terrible quarterly results and future outlook on May 24 and ended up down 32 percent for the month.
Again someone knew and acted on the information.”
Ross Stores Inc ($ROST) calls gain 460% in a matter of days!
“It took less than a week for traders to post massive gains in option positions on Ross Stores Inc (ROST).
We saw the purchase of 5,000 August $55 CALLS for $0.70 and $0.80 as part of a large CALL buy with shares at $52.67.
This was clearly a new position, as volume was well above the strike’s open initial interest of 2,114 contracts.
Those CALLS traded for $4.50, an average gain of more than 465%. The stock rose 12.4% in the same time frame, underscoring how quickly options can far outpace their share price .
Ross Stores Inc (ROST) jumped 10.57% to close at $59.02. The retailer raised its outlook after beating estimates on the top and bottom lines after yesterday’s close.
Yet again, information was key for traders bet big on that move.
The bottom line is short term exposure, little downside risk and massive upside potential.”
Why Use SMO
As stated previously, we never know why these trades are made. But, with our constant monitoring of the market with our algo-trading software. We are able to identify the plays early and benefit from the Smart Money.
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