11 Sep

Sucker Bets Or Smart Money Trades?

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I want you to take a look at some of the options bets that came across my scanner this week…

 

 

Traders were all over Tesla Inc. (TSLA), Apple (AAPL), FedEx (FDX), and NVIDIA Corp. (NVDA) options.

At first glance, you probably think these are “smart money” trades placed by the Wall Street whales…

However, if you take a closer look — you’ll realize these are actually “sucker bets”.

I know what you’re thinking, What the heck are you talking about Jason? How can one possibly know that?”

Well, there is one tell signaling these bets have a high chance of expiring worthless

And there is a risk-defined strategy to take advantage of these low-odds bets.

 

The One Indicator To Crush Low-Odds Bets

 

If you look back at the screenshot from before, you’ll notice there are key data points to keep an eye on.

First up, there’s the contract specification, it’s highlighted in yellow.

For example, TSLA $500 Call ACTIVITY For 09/18/20 is one trade that came across the table. I want to compare this to the blue highlighted text. Here it’s “Last = $362.9”.

What does this signal to me?

Someone purchased the $500 calls in TSLA expiring on Sept. 18, when the stock was trading at $362.9. That means the trader needs TSLA to get above $500 just to break-even if they hold until the expiration date.

In other words, when they placed the trade, they needed TSLA to move by $137.10, or 37.78%, just to break-even by the expiration date.

I don’t know about you, but to me, that’s a low-odds bet.

Why?

Well, those options expire BEFORE the battery day on 9/22, so while it may runup into the catalyst, it might have a tough time getting to $500 by next Friday.

This is the type of bet I want to take advantage of.

You see, the odds of TSLA getting to $500 and staying above on 9/18 is less than 5%.

In other words, whoever bought those calls at the time had more than a 95% chance of losing their premium by the expiration date.

That’s just wishful thinking to me. If you notice, there are plenty of trades that came up on the scanner, and they’re actually all “sucker bets” to me.

What I’m focused on is the orange highlight, % Chance OTM. This lets me know the odds of me winning on a trade, if I sell those options.

Now, I don’t sell the options outright.

Instead, I use a risk-defined strategy that allows me to win in three different scenarios.

By focusing on the odds and using a strategy to take advantage of the “sucker bets”, I’m able to stack the odds to my favor.

Allow me to show you how it all works.

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