A big article talks about what rich people are doing with a company called Sea. Some rich people think that Sea's price will go down, so they buy something called puts, which let them sell Sea's stock at a lower price later. Other rich people think the price will go up, so they buy something called calls, which let them buy Sea's stock at a lower price now. The article also says that these big people are watching Sea's price closely and might want to buy or sell more if it reaches certain levels between $25 and $60. Read from source...
1. The title is misleading and sensationalized. It implies that there is a clear trend or consensus among the whales about what they are betting on sea, when in reality it is just an analysis of some options data that may not reflect their overall strategy or opinions. A more accurate title could be something like "Some Whales Are Betting On Sea Options: What Does It Mean?".
2. The article relies heavily on option history and volume data to make claims about the expectations and price movements of the whales, but does not provide enough context or explanation for how these metrics are used or interpreted in the options market. For example, it does not mention what kind of contracts (calls, puts, spreads) were traded, how many days before expiration they were opened, or what factors could influence the demand and supply of these contracts besides the whales' intentions.
3. The article uses vague terms like "bearish" and "bullish" to describe the whales' stance, without explaining how these are measured or defined. For example, does being bearish mean expecting a decline in Sea's stock price, or just having a lower average price than other investors? Does being bullish mean expecting an increase in Sea's stock price, or just having a higher average price than other investors? These terms are subjective and could mean different things to different people, so they should be clarified or avoided.
4. The article makes assumptions about the whales' motivations and goals, without providing any evidence or reasoning for them. For example, it says that the big players have been eyeing a price window from $25.0 to $60.0 for Sea during the past quarter, but does not explain why they would choose this range, what factors could affect their decision, or how they plan to achieve their desired outcomes.
5. The article ends with an unrelated paragraph about looking at the volume and open interest in options contracts, which seems out of place and confusing. It does not connect to the previous analysis of the whales' bets, and it introduces new concepts that are not explained or explored further. For example, what is the difference between volume and open interest, how do they relate to each other, and why are they important for due diligence?
The article has a bearish sentiment.
Possible recommendations based on the article are:
- Buy SEA Jan 2023 $65 call at $12.5 or lower, with a target profit of $87.5 (70% return), expiring in January 2023. This trade is bullish and assumes that the stock will rise above $65 by then. The risk is limited to the premium paid for the call option, which is 19% of the current stock price.
- Sell SEA Jan 2023 $45 put at $7 or higher, with a target profit of $8 (80%) if the stock stays above $45 by expiration. This trade is bearish and assumes that the stock will fall below $45 by then. The risk is limited to the premium received for the put option, which is 16% of the current stock price.
- Sell SEA Jan 2023 $50 call at $4 or higher, with a target profit of $11 (120%) if the stock stays below $50 by expiration. This trade is neutral and assumes that the stock will trade within a range of $45 to $50 by then. The risk is limited to the premium received for the call option, which is 13% of the current stock price.
Risks:
- The options prices are influenced by many factors, such as time decay, implied volatility, supply and demand, and dividends. These factors may change over time and affect the trade outcomes. Therefore, it is important to monitor the options positions regularly and adjust them accordingly.
- The stock price may move significantly before or after the expiration date of the options, which may result in large gains or losses depending on the direction and magnitude of the movement. Therefore, it is important to set stop-loss and take-profit levels for the underlying stock and the options contracts.
- The whales' activity may not necessarily indicate the future direction of the stock price, as they may have different motives, strategies, and time horizons than retail investors. Therefore, it is important to do your own research and analysis before making any trading decisions based on this article or any other source.