Last Monday in True Options Masters, I pointed out a few unusually large bets on three banking stocks — Wells Fargo (NYSE: WFC), Citigroup (NYSE: C) and Bank of America (NYSE: BAC).
Traders took advantage of last week’s broad market dip to bet on a quick rebound in the banking sector. And what a rebound we got…
Citigroup closed the week up nearly 5%, BAC rose over 6% and WFC was the standout, rising over 10%. The latter two erased the previous week’s losses, with WFC even gaining new ground.
And a couple key news events aided this rebound…
On Thursday came news of a $1 trillion infrastructure bill with bipartisan support. That pushed the broad market higher on the day, banks included.
Then, after the market closed, we got good results from the latest Federal Reserve stress test. These three banks, along with 20 others, passed.
That’s bullish, because it means the Fed was able to lift its previous restrictions on banks to return capital to shareholders through dividends and buybacks. It imposed these last year due to the pandemic.
The stress test results helped carry the rally into Friday, adding to these traders’ gains just before their options were set to expire.
Remember, we highlighted the fact traders were willing to lay out big bucks to bet on a rebound in the banking stocks.
So let’s see where these trades stand today…
The Smart Money’s Big Bank Trade
Let’s start with Wells Fargo. The trader bought 9,000 of the June 25 $44 calls. They paid about $0.69 … and the calls closed last week at $2.24.
That’s a $1.3 million profit … or a 211% gain in a little over a week.
For the $950,000 bet on Citigroup, the trader still has some time. They grabbed 5,000 of the July 23 $70 calls for $1.90.
That option closed at $3.21 Friday, which means they are sitting on a $655,000 profit — a 68% gain. And they still have almost a month to see their profits grow.
And for Bank of America, a $1 million bet on the June 25 $39.50 calls turned into $2.4 million. That’s a quick $1.4 million profit, or a 130% gain.
211%, 68%, 130%. Three smart money options profits that took just a week to realize.
It’s so important to follow these moves. The smart money seemed to know some good news was set to lift these stocks. That’s why they were willing to bet millions.
Here’s the thing, though…
Did You Beat the Smart Money?
If you’d placed each of these bets yourself at the time you received my note last Monday, you’d be sitting on gains of 622%, 81% and 255% yourself.
That’s right… In each case, you would’ve done even better than the smart money.
If you’d bought even just a single contract of each option and sold them at 4 p.m. on Friday, you’d have an extra $491 in your pocket right now.
(So before I go on, I have to know. Did you profit on these smart money trades? Tell me your story here.)
It pays to follow the smart money on trades like this. They’re plugged into the markets, in a way most aren’t.
That’s why I’m making it a priority to bring you the biggest unusual options activity I see each week. There’s no reason that you can’t make profits just like these, with the right info.
And that brings me to what I’m seeing for this week…
This Week’s Unusual Options Activity
Some more unusual options activity appeared on my radar this week, this time on biotech company Schrodinger (Nasdaq: SDGR).
Schrodinger operates a software platform that assists pharmaceutical companies in the drug-discovery process — using data analysis and artificial intelligence.
And someone just dropped a little over a million bucks to bet on a sharp rally.
This trader grabbed 10,000 contracts of the July 16, $85 calls for $1.05. That’s just over $1 million on the trade, but later that day the option climbed to $1.45, a $400,000 profit in a matter of hours.
Thing is, the trader didn’t take the payday. They’re holding out for something bigger…
Keep in mind, this is a mid-cap stock that doesn’t have an earnings report in the coming weeks, or any other major catalyst before the option is set to expire.
That makes me think the trader knows something we don’t…
And seeing how they didn’t budge when they could have snagged a quick 40% to 50% profit, I’m convinced they’re after something more.
This is one to watch closely over the next couple of weeks. As today has shown, it pays well to follow the smart money into options trades.
I’ll keep my ear to the ground on any new unusual options activity, and keep you posted on those opportunities.
Chad Shoop, CMT
Editor, Quick Hit Profits
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