27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.
With the SPDR S&P Retail (NYSE:XRT) down 2 percent Thursday, Foot Locker, Inc. (NYSE:FL) was bucking the trend, trading higher by 1.3 percent. Foot locker is now up 1 percent overall in what has been a disastrous week for the overall market, and one option trader made a big bet the momentum will continue through the end of the week.
The Trade
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Benzinga Pro subscribers receives an options alert Thursday morning related to bullish trading in the Foot Locker options market.
At around 10:15 a.m. ET, a trader purchased 558 Foot Locker call options at a $57 strike price that expire on Friday, May 10. The calls were purchased at the ask price of $1 and represent a $55,800 bullish bet at a break-even price of $58. At the time it was place, the trade suggested about 2.5 percent upside for Foot Locker shares in less than two days. The bet was particularly bullish given the weakness in the overall market.
Options Insight
Due to the relative complexity of the options market, options traders are often seen as more advanced than the typical stock trader. Many large options traders are institutions or wealthy individuals that can often have have a unique perspective or information about a company. Even traders that focus exclusively on stocks watch the options market closely to gain insight into what options traders may be thinking.
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Playing The Trend?
Foot Locker's stock has been steadily recovering since late 2017 and has had a solid year so far in 2019. The call options purchased Thursday expire at the end of the week, well ahead of Foot Locker’s earnings report expected out May 24.
Since there was no major news out from Foot Locker this week, there are two likely explanations for the bullish buying. First, the trader could know some news about Foot Locker that is not yet public. The other likely explanation is the trader has seen how well Foot Locker shares have held up so far this week and is simply betting on that outperformance to continue throughout the rest of the day on Thursday and into Friday.
Unfortunately, it’s impossible to be 100 percent certain if an option trade is a hedge or a stand-alone position. Stockholders often use call options to hedge against a larger bearish stock position. Given the Foot Locker trade was relatively small in size, it’s unlikely to be a hedge in this case.
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27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.