Two weeks ago, on July 7, 2014 we wrote about a few large unusual option trades we had noticed. Today, we thought we’d see how those traders did on those trades. They involved calls in Fortinet Inc. (FTNT), InvenSense Inc (NYSE:INVN), and Cirrus Logic, Inc.(NASDAQ:CRUS).
The first trade was in Fortinet Inc. (FTNT) where a trader bought 3,100 August $25 PUTS in FTNT. Clearly they thought FTNT was going much lower before August 16 expiration of the puts. The trader paid $1.30 per put contract for a total value of $403,000.
At the time of the put buy it was trading in the $24.91 area. Now, today, Fortinet (FTNT) is trading at $23.97 down a penny today. Meanwhile those August $25 puts are worth $1.70. That’s a profit of 30 cents per contract, not bad, but certainly not as big a payday as usual for these unusual options trades.
If the buyer sold the puts today they’d profit “just” $93,000 from their trade of two weeks ago. We say just, because most of the time these unusual trades net a minimum of 100% profit. However, we suspect they may have sold those puts back on July 8, for a much bigger profit, when the stock plummeted down to $23.17 late in the day on the 8th. They may have actually gotten their double.
Invensense Inc. (INVN) saw a lot of activity in their options over the past few months. On July 7th, a trader bought 1,016 September $30 calls in INVN, paying around 50 cents. The stock was trading at $24.03 on the 7th of July and was up $1.39 that day.
Things got ugly the next day for INVN so this investment will require some time to get profitable. Today the stock is back over $24 to $24.15 after rallying the past week from the $22’s. The Sept $30 calls are bidding 35 cents and asking 50 cents, so the smart money is down approx 15 cents or 30%. There’s still plenty of time for a rebound, assuming Russia/Ukraine/Israel/Gaza don’t derail the markets. The options expire September 20th.
INVN does announce earnings July 29th, so that could give some lift, or not.
Cirrus Logic (CRUS) saw a trader buy 1,000 of the July 11 weekly $23.50 calls on July 7. That obviously came and went rather quickly. In fact, as we wrote about it on the 7th the buyer had already more than doubled his money in two hours that day. We suspect he sold that position the same day. He could have made a bit more if he held on into the early trading on July 8th, but really, why get greedy when you already have a double?
There you have it, following the “smart” money can make you a boat load of money in short order. Just keep in mind it can also lose you a boat load of money just as quick. You have to play a basket of them and you should come out well up.