Did Unusual Options Activity Forecast GameStop and the Reddit Rebellion?

We talk a lot about “smart money” and how unusual options activity is a tool we use to monitor their activity and tip the odds of trading in our favor. Oftentimes, we talk about the smart money as being company or industry insiders that know of news that will influence the price of a stock. But what happens when the smart money is … well, just smart. Could unusual options activity have spotted GameStop’s rise?

In short, yes. Since December, the Heat Seeker^® algorithm flagged trades in GameStop, American Airlines, AMC, BlackBerry, and Bed, Bath & Beyond on multiple occasions. Let’s take a closer look at what we flagged and how you can spot the next GameStop.

GameStop: Spotting Unusual Options Activity

For background, check out these three keys for identifying unusual options activity.

On December 23, when GME closed at $20, Jon Najarian noted on the 3@3 that there was quite a bit of unusual options activity in the name. Specifically, on the bullish side, there was an order where someone went long a February $22/$30 call spread and short $15 puts in large size. This defined risk trade turned out to not be bullish enough based on where the stock is trading currently. Check out the clip below.

But that wasn’t the only time that the Heat Seeker algorithm flagged GameStop unusual options activity in GameStop. On January 13, with the stock price at $27.00, someone purchased 4,700 $28 calls for $0.85 to $3.25 with an open interest of just 1,900 contracts.

When those options closed, GameStop stock was trading well above $300. If held to expiration, buying the stock at $31 (the $28 call plus the cost of the option) would have yielded this trader profits of $126 million on a $1.4 million options position.

Of course, there is no way to tell where this trader got out, so those gains are hypothetical. But any way you cut it, this trader made out spectacularly.

Beyond GameStop

While GameStop got most of the attention, our Heat Seeker algorithm flagged trades in American Airlines, AMC, BlackBerry, and Bed, Bath & Beyond—all before those stocks gained interest from the mainstream media.

Well,
12/31 $AAL Buyer of 40,000 May 15 calls, stock $15.78
01/15 $AMC Buyer of 4,800 Feb 2.50 calls, Stock $2.34
01/14 $BB Buyer of 21,500 September 10 calls, Stock $8.67
01/19 $BBBY Buyer of 14,600 29 Jan 30calls,Stock,$24.56
We noticed, @MarketRebels We are Rebels … https://t.co/sOVoKdMw0v

— Pete Najarian (@petenajarian) January 30, 2021

The below screenshots are from our Unusual Option Activity Elite chat room, which is where we post all the unusual options activity that the Heat Seeker algorithm flags.

American Airlines

AMC

BlackBerry

Bed, Bath & Beyond

How to Spot the Next GameStop

We believe that unusual options activity can help you spot the next stock that’s poised for a big breakout. If you’re interested, here are three things you can do:

1. Check out The Take with Pete Najarian each morning at 9:30 AM ET. Pete talks about what’s going on in the market and what unusual options activity we’ve spotted in the first hour of the trading day. You can even sign up for a reminder here.
2. Watch Market Rebellion’s 3@3 with Jon Najarian. Every day, Jon Najarian goes live on Twitter to talk about three unusual options activity trades that we saw that day. It won’t give you insight real-time, but it is something that you can start to monitor for free. Watch the replays posted every night on our website.
3. Check out Market Rebellion’s Unusual Option Activity Masterclass. This gives you more than seven hours of in-depth content on how to put unusual options activity to work in your portfolio.