With the start of June on Monday — I believe the “smart money” will be in full force and placing their bets left and right.
You see, with the first half of 2020 coming to an end in the coming weeks… things can get a little wacky…
I think there will be some sectors that will sell-off, while others will start to pop off.
When it comes to uncovering “smart money” activity, I focus on order flow. More specifically, options order flow
I believe some of the brightest minds on Wall Street throw down bets… and it allows me to piggyback off their best ideas.
Today, I want to reveal how I’m able to detect “smart money” bets… and one stock that’s on my radar right now.
In order to follow the options order flow, I use the Dollar Ace Scanner.
You see, every trading day… there are millions of options contracts traded… and there’s no way I can sift through all of them to uncover where the “smart money” is placing their bets.
Basically, I have specific filters to figure out their highest conviction trade ideas.
Let me show you what I mean by that.
On Friday, ZNGA ran up to 52-week highs and finished at $9.15 on the day, closing 13.38% higher.
Chart Courtesy Of StockCharts
The most interesting thing about this stock is that there was an unusual amount of calls being scooped up.
You see, my scanner actually detected this activity early in the morning on Friday, just 17 minutes after the opening bell.
I believe the “smart money” was bidding up these options… looking for a large move in ZNGA. The first large options order I saw fire off:
The most interesting part about this is that they bought those options when ZNGA was trading around $8.42.
Now, on a typical day, ZNGA trades about 10K calls per day. Within the first 17 minutes into the day, there was over 50% of the average call volume…
All day, there were calls firing off, and when the dust settled…
On Friday, more than 255K calls traded…
While the stock gained 13.3% on the day and closed at $9.15….
Those July calls gained 82% after they were purchased…
If you do the math…
That means the smart money trader became $318K richer in a matter of hours…
Now, that wasn’t the only interesting call activity I noticed in ZNGA…
Approximately 67K calls traded on the July $9 call line.
Now, I wouldn’t be surprised if ZNGA continues its run and makes new highs.
The thing is I believe following the “smart money” can be beneficial… and if you want to learn the strategy I use to legally and ethically “steal” ideas from these traders…
Stocks have been shaky at these levels… but that’s not stopping the “smart money” from chasing alpha.
If you know me, I love following the “smart money” activity because it allows me to effortlessly generate trade ideas.
Not only that but, if you know anything about some of the largest players on the street, they have skin in the game.
Before I dole out what unusual options activity I noticed in Metlife Inc (MET), I want to reveal how I look for these plays.
When it comes to unusual options activity, I have a scanner that detects the “smart money” moves. Now, when it comes to identifying these plays…
It’s important to think about them in relative terms.
What do I mean by that?
Well, think about it like this… if a trader slams into 4,000 contracts on a single order in the SPDR S&P 500 ETF (SPY), it may seem like a large order to the untrained eye.
However, it’s really not because, on any given day, millions of contracts can trade on SPY across various classes.
Now, let’s say a stock on average trades 500 options contracts per day… but one day a trader comes in and scoops up 3,000 calls. I would consider that an example of a stock with unusual options activity.
Of course, it’s not just looking at that… I also look at how much money was behind the bet… the strike price of the options in relation to the stock price… the expiration date… and a couple of other factors.
Luckily for me, my scanner does all the heavy lifting.
It allows me to filter for noise and actually uncover where the “smart money” is actually making moves, and not their gamble trades.
For example, the other day, I saw a large options trade go off in MET… and I believe it was an epic bet, and this “smart money” player has skin in the game.
They purchase 8424 MET Aug $40 Calls for $1.45…
That was a whopping $1.22M bet.
At the time, the stock was trading at $36 and change… they need it to rise by 14% just to break-even by the expiration date.
Now, one thing to mention is the stock closed at $36.93 yesterday… and the August options include an earnings event.
With insurance companies gaining some strength, could MET catch a large bounce very soon?
Will it beat earnings expectations?
With MET about 30% off its 52-week highs, I wouldn’t be surprised if the stock continues to bounce and potentially break out from its recent highs.
Now, if you think this is a one-off smart money trade…
I’m sorry to say, but you’re mistaken.
I actually see options activity like this all the time.
If you want to learn how I’m able to turn this information into trade ideas and large returns… then you might want to check out my unusual options activity training workshop.
Luckin Coffee (LK) seems like it’s back from the dead… after opening up for trading after it was halted for more than a month.
It’s been one of the most hated stocks in the market… and it’s even facing delisting from Nasdaq.
The stock opened at $2.52… and hit a low of $1.33 recently.
But LK was popping this week.
Heck, this stock was my highest-conviction trade idea this week…
I know what you’re thinking… “Kyle, how could a stock that was accused of fraud be your highest conviction trade idea?”
Well, I actually saw value and figured LK could pop after its recent sell-off.
Now, if you don’t already know… LK shares dropped from more than $40 to under $2 in just a matter of months…
LK is a company that has been accused of fraud and their CEO and CFO actually stepped down a few weeks ago.
There’s been a lot of awful headlines surrounding the company, and the selloff may have been justified. However, it looked to be overdone to me.
You see, LK is still one of the most popular coffee stores and brands in China… and actually has real revenues.
The reason why LK was my highest conviction trade idea, which was sent out to Fast 5 Trades subscribers yesterday, was due to the oversold chart pattern.
Basically, I figured LK could catch a bounce.
Now, don’t get me wrong when I say it was my highest conviction trade idea.
I wasn’t looking for this stock to go back to $40… I was just looking for a pop in 5 days or less. That’s the goal of Fast 5 Trades for me.
Chart Courtesy of StockCharts
With LK, it was already catching a pop, and on May 26 at 10:05 AM… here’s the plan that I sent out to Fast 5 Trades subscribers…
Buy Zone: Under $2.25
Profit Zone: Over $2.50
Stop Zone: $1.40’s
My Action: I bought 20k shares at $2.09
Traders could’ve bought shares below $2.25… and it actually formed a bullish chart pattern. I was only looking for a quick 10% winner, in just a few days.
This morning, LK made a large move…
Chart Courtesy of StockCharts
Sure LK made a move after the open… but I was actually taking profits in the pre-market.
Here’s the note I sent out to Fast 5 Trades subscribers at 7:11 AM this morning.
LK is up about 40% from the entry point of $2.09 yesterday, as shares are trading at a high of $2.95.
Shares could go higher (or lower) from this point right now, so I’m just going to take my profits, as it’s way above my target profit zone.
My action: I sold my shares of LK at $2.89 for about a $15.7k win!
Extra note: If you don’t know how to sell in the premarket, this is a great time to call up your broker and have that ability turned on. It’s always a lot less stressful when you are wanting to sell and in a big profit, rather than trying to sell at a big loss. Each broker is a tad different in how they do things. Normally, I don’t sell in the premarket unless shares are up/down a large percentage.
In less than 24 hours, I was able to lock in a 38% winner in LK!
The thing is…
If you missed out on the trade in LK… that’s okay…
Because next week, I’m going to drop my next highest-conviction trade idea. If you want to learn more about how this all works, click here and watch this quick training session.