Trade Recap: COF Trade Based on Options Flow

I often talk about following the smart money into trades by monitoring options flow. Here’s another example of a trade I took based on the flow.

Trade Entry

On Monday 11/27, the smart money bought over $800k of COF (Capital One) 107 strike call options expiring on 12/15, with the stock trading just above 106.

Here’s a screenshot of the flow from the Blackbox scanner that I use:

The daily chart showed COF breaking out of consolidation, and the general market was looking very bullish, especially for the beaten down and lagging financial sector.

I decided to follow the smart money trade and bought the 107 strike calls at $2.19, almost the same price as the smart money entry.

I also bought some common shares, just to take the time pressure off me, in case the trade took longer than expected to work out.

Trade Exit

Midday on Friday Dec. 1, COF was trading at 115 when I decided to sell my calls at $8.60. The main reason was because 115 was acting as an area of resistance and the S&P was hitting up against 4600, which could also potential serve as an area of significant resistance.

I also peaked at my P&L and felt that I wanted to lock in my profits. In 5 trading days my calls went from 2.19 to 8.60, for just short of a 300% profit. Not bad for week long trade.

I’m still holding my commons to see if the market breaks above 4600, but I’ll be monitoring my position closely and lock in my profits if I see weakness.