This Surprise Stock Could Make You Big Bucks

It’s no secret that options are often the investment vehicle of choice for “smart money” traders.  Big funds and trading firms regularly use options to establish their biggest positions – sometimes in conjunction with stock holdings, other times just using options.  It’s especially true for the most heavily traded ETFs and stocks.

Less often, you’ll see big money trades occur in low-activity options chains.  Stocks that don’t have very active options chains tend to have wider bid/ask spreads and aren’t nearly as liquid as the active options products.

If you scan the biggest options trades from any given day, you’ll see a lot of familiar names.  There will be the heaviest traded index ETFs and volatility ETFs.  There are also usually some of the big tech names near the top.  It’s relatively rare to see a name on the list that’s unrecognizable by most investors.

However, that’s exactly what happened to me just the other day.  I came across a ticker that I’m not sure I’ve ever seen on an options screener before.  The name of the company is Blackhawk Network Holdings (NASDAQ: HAWK) and the company provides prepaid products and payments services such as prepaid gift and telecom cards.

I admit, I had to look up HAWK to see what the company does.  Moreover, it trades all of 300 option contracts a day on average.  In other words, when there’s a big options trade, it’s easy to notice.

So here’s the deal…

Someone made a massive trade in HAWK – and I mean massive, especially when compared to average volume.  This trader bought 10,000 February 35 calls while selling 20,000 40 calls in the same expiration.  This type of trade is called a ratio spread and it helps reduce the cost of the trade.

In this case, the trader paid around $0.50 total.  That makes the breakeven point $35.50 at expiration in February, with max gain at $40.  Even with the double-short call at the 40 strike, the trader still dropped about $500,000 on the trade.  But, max gain is in the neighborhood of $4.5 million.

At the time of the trade, the stock was sitting at $34.  After the trade hit the wire, HAWK shot up 7% on the day.  It’s almost certainly due to the trade, which is a lot of money to spend in such a low volume options name.  It’s also obviously a very bullish trade on the stock.

There’s nothing wrong with replicating a trade like this in your own portfolio, as someone with a ton of capital clearly believes the stock is going up.  However, you probably want to avoid doing a ratio spread since it opens up your risk considerably to the upside.

Instead, I’d recommend paying a bit more and doing a simple call spread.  The 35-40 February call spread costs about $1.75 with the stock at $35.65.  That’s not too steep a price to pay since the spread is already in the money.  You can still make $3.25 on the trade, which is definitely a reasonable haul in this situation.

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Source: Investors Alley

Crypto Forecast: From $731 Billion to $10 Trillion

A broker from a big bank just did something I’d never do…

He put a number on the potential value of the blockchain market.

If you think, as I do, that blockchain technology will expand from dozens of uses to hundreds and then thousands, how can you calculate a precise market value for that?

It’s like Thomas Edison trying to predict in the late 1800s how much the electricity market would be worth a few decades into the 20th century.

Did he realize at the time that almost everything, not just lights, that we make and use would be electrified?

Probably not. How could he?

(Perhaps the one thing he thought would be electrified – vehicles – didn’t catch on until more than 100 years later!)

I believe at some point in the future (10 years? 20 years?), most of the services we’ll be using on a daily basis will be enabled by the blockchain.

Again, how can you put a price on such a ubiquitous technology?

Is it in the tens of billions? Hundreds of billions? More?

A Report From Deep Inside Wall Street

That’s the best thing about the report this broker put together.

It does not come from crypto investors talking their own book… initial coin offering companies hyping their future growth… or blockchain evangelists espousing best-case scenarios as a given.

Mitch Steves, the author of this report, is a traditional Wall Street equity analyst. He works for the RBC Capital Markets subsidiary.

His only connection to blockchain and crypto?

Among the companies in his bailiwick is NVIDIA. It makes graphics processing units for mining cryptocurrencies.

By the way, he says the $4 billion-plus market for mining cryptocurrency is here to stay.

Steves says that blockchain technology is misunderstood – that store of value and payment use cases are the most commonly cited but “the least interesting.”

The single most “positive technology” breakthrough is the one staring us in the face: The blockchain, the underlying technology, HAS NEVER BEEN HACKED.

(And, in my opinion, WILL NEVER be hacked.)

This is no small thing. Steves compares Box, a content management platform, to Filecoin, a decentralized blockchain equivalent, to highlight the differences…

With Box, your data is owned and controlled by a third party that has access to your information (a photo loaded can be retrieved by anyone with access to Box servers – employees). With Filecoin, your storage is distributed and decentralized, making the holders unable to retrieve your photo (they would need to hack every computer on the decentralized network – blockchain). Your information is now secure, and without your private keys, it cannot be accessed.

This is an early case of how a globally decentralized network of computers can work using the blockchain. Steves calls this network of computers the “World Computer.”

He says that same concept can be applied to a “wide variety of decentralized applications (aka ‘dapps’).”

I completely agree.

Rose-Colored Glasses?

What Steves is saying is reasonable and, frankly speaking, not entirely novel. People who aren’t playing close attention may be confusing hacks of exchanges and individual wallets (which has happened) with hacks of the blockchain itself (which has never happened).

But insiders have well understood the security benefits of putting data, transactions, assets, documents and sensitive information on the blockchain… and how the blockchain makes it fast, easy and secure to track these things.

But it’s nice hearing this confirmed by a big bank with no vested interest in the crypto or blockchain markets.

And because Steves hails from outside the crypto community, he openly acknowledges the “many risks to crypto.” No rose-colored glasses for him.

Among the risks, he lists the possibility of an attack if a single entity were to garner more than 50% of the computing power (which, I should add, would be pretty near impossible).

Other risks mentioned? Coordinated attacks to manipulate prices… and the potential for smartphone wallet hacking.

The Worth of the Market Crypto Will Address?

How he arrives at this big round number turns out to be the most disappointing part of his 36-page report.

He basically took a third of the roughly $30 trillion in assets held in offshore funds and gold. Just a rough stab, in other words.

But perhaps that’s as it should be. At this early stage, trying to do anything more would be a reach.

We simply don’t know how big this number will be. Anybody who says differently is lying to themselves or everybody else.

However, I believe it will be a big number. Blockchain technology is driving a surge of innovation in the development of new protocols and blockchains.

There’s a long way to go. And nothing is a given at this point. But decentralized computer technology has the potential to reinvent huge swaths of the global economy.

With that kind of upside, even a modest investment could yield quite a large return. We can help you identify the best blockchain technologies raising money.

Just click here if you’re interested.

Good investing,

Andy Gordon
Co-Founder, Early Investing

Source: Early Investing

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