It’s the kind of trade that every single trader has dreams about. The exposure only lasts a few minutes, but because of a perfected style and split-second timing, tons of money was made. In this case, over $200,000. The reason why the trade was so successful was because this trader was able to watch the news, anticipate how markets would act, and then timed everything done in an almost too good to be true way.
On Thursday, June 18th, it was announced that Sequential Brands Group might be buying up shares of Martha Stewart Living Omnimedia. Within a couple seconds of the announcement, a moment before trading was halted, someone was able to buy 2,600 call contracts, most of which were set to expire the next day. On a day where only about 50 of these contracts change hands, this was an exceptionally large number--and from just one person. When the stock was once again available for trade, the price soared in value, making those contracts very lucrative.
Having a stock shut down and become unavailable to the public for a little bit during the course of a trading day is not particularly uncommon. When something like this happens and there is an irregularity, or something out of the ordinary happens that could provoke an irregularity, precautions like this help to prevent illegal activities.
The stock went up in value by 22 percent. The options went up at a much higher rate because they were set to expire so quickly. The option value went from $0.33 to $1.10 per share, and the amount of time that it took him to make that money was less than an hour. It’s a Cinderella type story, and it’s one that every beginning trader shoots for. But it’s a situation that only happens once in a great while in reality. Experienced traders know that making a profit is more about the day to day grind than finding that one big trade.
How Does This Apply to Me?
The average trader rarely ever gets so lucky, but there are some things that you can do to better your chances of executing one of these once in a lifetime trades. For one, pay attention to the news. It doesn’t matter how you trade, the news is vital. Binary options, stocks, traditional options all are influenced by the news and all present huge opportunities for profits on a daily basis. You just have to find that right moment and time it correctly.
The second take away from this is the fact that creative trading methods can be extremely lucrative. The average day trader may not have thought to purchase options in a situation like this, but would have tried to just buy the stock in the traditional manner. And while in a situation like this where the stock is not a hugely popular one and binary options do not apply to it, that does not mean that situations like this do not occur with the stocks that are traded as binaries. It just goes to show you that being open to trying new things out and looking at things from angles that you may never have thought to look at them from will sometimes have amazing results. Will it happen everyday? No! But it will happen once in a while. It might not ever happen to you on the scale that this one extreme example did, but there are plenty of opportunities out there, and finding them can make a big difference in boosting your profits over the course of the months and years.