Options trading can be a lucrative business for those who know how to play the game. From front-running market news to capitalizing on Black Swan events, traders have made millions by betting on the right options at the right time. For the uninitiated, there are 2 basic flavours of options — a call and a put — you’d buy the former if you thought the price was going up, and the latter if you expected the price to drop.
In this article, we’re going to explore five extraordinary options trades that made it big, generating huge profits for traders who knew how to read the market signals.
Algo front runs market news
In March 2015, an unidentified trader made a profit of over $2.4 million in just 28 minutes by buying $110,000 worth of calls on Altera stock.
It all started with a news release saying that Intel was in talks to buy Altera.
Literally, seconds later, a trader bought 3,158 out-of-the-money call options with a strike price of $36 for $0.35 per contract — which ended up being worth $7.60 less than 30 minutes after placing the trade.
It’s likely that the clever trader had an algorithm which picked up and analysed the news. Although we think it might have been Biff with his almanack.
Universa Longs the Vix with SPY Puts
“Black Swan” hedge fund Universa made a $1 billion profit buying SPY (S&P500 index) Puts on August 24th, 2015 — right as the market flash crashed, down around 20%, and the volatility index, VIX, soared about 50%. Talk about great timing.
Paul Tudor Jones and the overpriced SPY
On October 19, 1987 — Black Monday — the market absolutely collapsed, but this was great news for trader Paul Tudor Jones, who made a whopping $100 million profit.
Jones had been buying SPY (S&P500) Puts after realising that the stock valuations were way overpriced, especially considering the 10% interest rate at the time.
But of course, these were absolutely nothing like the market conditions we’re seeing ourselves in today, with raging inflation, a frothy market and massive rate hikes right?
50 Cent’s VIX accumulation
Between 2018 and 2020, an anonymous trader by the name of 50 Cent was buying up massive tranches of the VIX volatility index — Around $800M worth in fact.
Along with $1.3B in Corporate Puts, $350M in SPY & Euro Stoxx Puts and $145M in Gold hedges, 50 Cent was certainly bearish, and it paid off big time when one recent event shook the world: Covid.
When Covid walloped the world in 2020, the markets instantly collapsed. Whilst longs were left totally underwater, 50 Cent had just bagged a tidy $2.6B profit.
Now what’s even more interesting is that in February of this year, 50 Cent bought another ton of VIX calls, betting that it would spike to the 50-level by the end of May.
Big Baller Bitcoin Bet
On 30 October 2020, an unknown trader bought 16,000 Bitcoin call options on Deribit with an expiry of January 29, 2021, and a $36,000 strike price.
The initial investment was 48 BTC, or $638,400, at the entry price of around $13,700. And it ran, and ran and ran, and our anon trader netted a gain of 1,648 BTC, or $58.2 million — a whopping 9,118% return on investment which outperformed some of the best currency market bets ever made.
Careful though — options aren’t for everyone
All of these are obviously phenomenal trades which paid off well for those involved.
Whilst options desks are a great way to go if you fancy yourself as a budding Michael Burry, a word of warning — most retail options traders lose money, but there are plenty of institutions which are very good at making huge profits selling options contracts.
That’s mostly because it’s complicated to play options — really complicated, and as such, they’re not generally recommended for new traders.
Options alternatives for retail crypto holders
The crypto world sometimes has some pretty extreme volatility, and the sort of 10% moves which are rare and devastating in traditional financial markets, are commonplace in crypto.
And when we’re talking about Bitcoin prices in the many thousands of dollars, volatile down-days can be devastating to your wallet and your mood.
Many enthusiasts want a way to hedge against downside movements and offset their risk, but find the complexity and sometimes high barriers to entry of options desks offputting (if they even know about them).
And sure, there’s using a stop loss, but they don’t always work as intended, and once triggered, you lose your exposure to upside gains, so whilst useful, they don’t always work out in your favour.
Fortunately, this is why we built Bumper, an altogether new and novel way for crypto users to hedge risk. Basically, Bumper prevents the value of your protected tokens from sinking below a certain point, but you still get to enjoy the upside gains if the market pumps.
Bumper redefines risk markets, making them easier and more accessible for all crypto holders and makes it super simple. Just pick a floor and a term length, and boom, you’re protected from any further losses below that floor. No need to learn the “Greeks” or have a PhD in technical analysis; just a few clicks and you get the peace of mind you’ve been looking for, knowing that whatever happens, your crypto is safe.
Find out more about Bumper here.