Three Straight Cash Bets on Healthcare, China, and Gold
With NFL preseason kicking off this Thursday, I couldn’t help but think of this quote from Hall of Fame player Randy Moss.
I watched him in college at Marshall in West Virginia, where my brother went to school. After that he played for my favorite team, the Minnesota Vikings.
He’s easily my favorite player to this day. And when this quote hit the press in 2005, it was an instant hit.
But it was his very next line that’s still used in memes today:
“Straight cash, homie.”
That’s how rich people pay. In cash — not checks.
This idea came to me this week because that’s what we look for in unusual options activity — straight-cash bets on a stock to make a move.
We want to ignore all the hedging, rolling, and spread trades I talked about last week. Why?
Because they either don’t have enough money to wager a hefty bet … or they’re not that confident.
When traders are confident, they don’t need to hedge their bets or play both sides of an expected move.
They place simple, straight-cash bets. So that’s what I look for.
And last week was busy, with about $6 million on the line.
Here’s what I’m tracking…
This Week’s Straight-Cash Bets
First up, a $1.5 million bet on Centene Corporation (NYSE: CNC), a health care provider of programs such as Medicaid and Medicare.
With the stock trading around $69, one trader grabbed 10,000 contracts of the December 17, 2021 $80 calls for $1.50 — $1.5 million on the line.
The stock needs to jump at least 18% for the trader to be at breakeven when December rolls around. So it’s a big move, but they have time for this to play out.
The company just reported earnings last week, missed expectations, and the stock slipped 3.5% on the news. So this trader is clearly looking for a quick rebound, and put up a nice chunk of change to show they’re confident.
Speaking of confidence… Our next options trade activity may point to a bottom for Chinese stocks.
One trader grabbed 9,000 January 21, 2022 $80 calls on JD.com (Nasdaq: JD), a popular ecommerce platform in China, for $4.25 per share.
The stock had fallen as much as 40% since peaking in February, before a nice rebound last week. That’s when this trader stepped in with a whopping $3.8 million trade — one of the biggest, if not the biggest, I’ve ever shared with you.
They need the stock to pop 20% over the next five and a half months. That’s plenty of time for a volatile stock like this to make a move. But we can’t discount China’s recent crackdown on its own tech market. As Mike pointed out on Saturday, the recent regulatory moves have wiped out nearly $1 trillion in value from Chinese stocks in just one week.
Though at this point, the negative news may be priced in. And that’s enough for this trader to put up nearly $4 million on the recovery.
Our final straight-cash bet this week was on gold stock Barrick Gold (NYSE: GOLD).
GOLD has lost nearly a third of its value in the past 12 months. It bottomed in March, but dipped again from May to June.
Now at least one trader is looking for things to improve from here. Barrick’s stock is tied closely to gold, but gold prices are making a similar move at this moment — trying to bounce higher.
Now, this is a smaller wager, just $425,000. But it is a very practical bet. They took an at-the-money strike price, $22, and went out to November 19, 2021 — giving them almost four months of price action. And they only paid $1.35.
That means their breakeven price is just 7% away. That’s less than half the size of the move our previous two traders need to break even.
So in this case, even a half-million bet is worth tracking when it comes through as a straight-cash trade.
As always with unusual options activity, treat these trades as speculations. Because no trader — no matter how deep their pockets — can predict the future.
Should you decide to follow them, never bet more than you can afford to lose completely.
Chad Shoop, CMT
Editor, Quick Hit Profits
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Investing has consumed my life since college. While double majoring in finance and economics at the University of North Carolina at Greensboro, I founded the university’s economics club, joined the finance club and participated in the Chartered Financial Analyst research competition to represent our school.