Nothing like some good ol’ volatility to stir up the options market…
Friday was the PERFECT day to watch the Big Money. Because as the S&P 500 sunk nearly 3%, they weren’t sitting on their hands like a classic investor would…
Nope, they traded all day long with multimillion-dollar slugs of cash.
These traders aren’t afraid of volatility. In fact, they embrace it. And they’re betting on more to come.
If you think the market heads lower this week, take special note of today’s bearish activity.
Because these traders aren’t satisfied with 3% down moves in the broad market. They’re laser-focused on taking down the stocks already showing major weakness.
Let’s start there…
Rapid-Fire Bearish Bets
These traders aren’t betting on a reversal here. Clearly, they expect more weakness in the weeks and months to come.
That was the overwhelming theme my scanner picked up.
A few traders went bargain hunting, and we’ll talk about those…
But the vast majority were bearish.
Let’s take a rapid-fire look at some of the biggest bearish bets of the week…
One trader laid down $3.3 million on the INTC July 15, 2022 $40 puts.
Another placed $3.1 million on the FB January 20, 2023 $200 puts.
Plus, a $1.9 million trade on the C September 16, 2022 $47.50 puts and $1.6 million on the COIN May 13, 2022 $105 puts.
This isn’t chump change.
We’re talking nearly $10 million on bearish bets in individual stocks.
Some traders were bearish on broad indexes as well, with millions more on SPY and IWM to decline over the coming weeks.
Listen — I know this probably isn’t what you want to hear.
(As if our portfolios need any more pain.)
But the good news is not ALL of this week’s traders were bearish.
At least two of them were betting on a reversal in the months ahead…
$5M on 2 Stocks to Rally
Despite last week’s decline, I still spotted a couple noteworthy bullish bets…
One laid down $2.5 million on the WFC January 20, 2023 $45 calls and another spent $2 million on the DIS May 20, 2022 $120 calls.
WFC is a competing bank to C above, and DIS is a major consumer name.
If these stocks mount a rally, it would be extremely bullish for our economy and the overall market.
That’s a sunnier note to leave things on. But we can’t ignore the elephant in the room.
A lot of you might be thinking this is “The Big One.”
The next bear market. No quick dip like we’ve come to expect… but a prolonged decline that will last for years.
Who knows if that’s the case?
Nobody. Not me. Not you. Not even the Big Money.
So… why worry about it?
We’re traders! Conditions like these are our time to shine!
I’ll continue to focus on the short term. I’ll follow my strategies, like my Profit Radar and my unusual options activity scanner to spot great trades in the market.
Follow along, and you won’t need to worry about a bear market.
You’ll be making money either way.
Regards,Chad Shoop, CMT Editor, True Options Masters
Chart of the Day:Not to Rub Salt in the SPY Wound, But…
By Mike Merson, Managing Editor, True Options Masters
(Click here to view larger image.)
Today, some tough love and much-needed perspective on the gains of the post-Great Recession bull market.
The chart above is of the S&P 500. “How is that possible!?” you might be asking. “This chart shows the S&P 500 hasn’t made a new high in 22 years!”
Okay, it isn’t just the S&P 500. It’s the S&P 500 charted against M2, the Federal Reserve’s measure of the money supply in circulation.
This shows us that, when accounting for the money printing of the last two decades, stocks have actually just barely risen above the 2008 highs.
So while stock market wealth in nominal terms has seemed to rise exponentially in recent years, it’s nothing compared to the dot-com bubble. And the American retiring off their 401k in 2022 is effectively just as wealthy as the one retiring in 2008. The gains are totally nullified.
What to make of this?
The key takeaway for me is that it’s far more profitable to trade the market than to depend on it for your retirement.
That means traders, who can navigate these up and down moves with grace while still beating the market, are the ones that really make wealth over the long term.
Mike Merson Managing Editor, True Options Masters