$19 Million Affirm (AFRM) Stock Options: Buy Now, Profit After Earnings?

we found three unusual trades one of which was worth $19 million on a firm stock ticker symbol afrm on the last trading day and what's also very unusual is that a firm reports earnings next week on August 28th after the market closes and so in this video we will Analyze This unusual option activity to find out how wealthy investors are trading a firm for earnings are they bullish in buying or bearish in selling because as we all know the rich have more access to information sometimes leaked Insider information such as earnings reports to make better financial decisions no wonder the rich get richer now as you can see from the charts our firm has been on a long-term downtrend this entire year and we are currently Trad trading at the top of this trend so will we break out of this trend from earnings or will we simply get price rejected down lower because that's what most technical analysts would conclude that this trend will continue to go downward because as we all know the trend is your friend but if you've been following our channel the data is our friend so without further Ado let's dive into the data as usual as we can see here on the options time and sales tape 7,646 contracts were being traded at the same time for these September 20 options at the 32 strike calls and the 25 strike puts so let's take a look at the option chain to find find out more as to what this wealthy investor is doing for this first unusual trade so September 20th we can see at the 25 strike puts we have an open interest of 6,864 this is less than the 7,646 so it would not be possible to close out of 7,646 contracts if there was only 6,864 that were opened so therefore those trades were opening trades because it's greater and when we take a look at the call side for the 32 strike calls only 155 open interest so again it's not possible to close out of these 32 strike calls because we only have 155 and they were trading 7,646 contracts so both of these contracts were opening trades and based on our analysis they were buying the 32 strike calls but selling the 25 strike puts and so when we Analyze This trade we can see from the risk profile here that this strategy is actually a long strategy the share pric is on the xais and so as the share price goes up profit increases more positive if it goes down it becomes more negative so that's a loss so this is a bullish long trade profit is on the y axis note the zero break even line here and so when we take a look at the Greeks we can see that the Delta is positive so another confirmation that this is a bullish long trade because if it was a short bearish position it would be a negative Delta now keep in mind this trade is hedged notice how the blue line is flat meaning their losses are limited all the way to the $25 share price because they sold the 25 strike puts and by doing so we can calculate the total buying power that this wealthy investor would have had to make this trade and so when we take a look here and calculate this out by selling the 25 strike puts they are essentially saying they're willing to own 100 shares at the strike price selling cash secured puts so each contract requires $2,500 of buying power and since we had a total of 7,646 contracts right here we multiply that out and we get $19 million of buying power required for this trade but keep in mind this is a higher risk trade because for one thing you can see this unusual trade here inputs which could actually be bearish so that is why we also hedged for our earnings trade but if you want a lower risk higher probability of profit trade then make sure to go to our website we'll put a link at the top here where we share better stock picks based on stronger data because not all trades that wealthy investors are in will be problem profitable even this one might be a loss but as long as we diversify with higher quality stock picks based on this type of data analysis then we can become more profitable in the long term now as we mentioned this trade here in puts what is this investor doing so let's analyze the second trade with 1,500 contracts and puts for the September number six we can see that at the 25 strike puts an open interest of 292 so this is less than the 1,500 so we know these are opening trades and you can see our position here POS stands for position and red means sell and So based on our analysis they were selling these 25 strike puts to open and that is what we also did but we used position sizing to manage our risk now let's take a look at the September 20 options and we can see at the 25 strike puts open interest of 6,864 the same options that were being traded for the first unusual trade and because this 6864 is greater than 1,500 it is possible that those 25 strike puts for this 1,500 contract trade was a closing trade so be aware of the risk with following this trade which is what we did and so you can see here our position and so we bought these 25 strike puts which actually creates a strategy known as a calendar spread and so when we Analyze This trade this is actually a bearish trade and we can see as the price goes down this trade becomes more profitable reaching Max profit of $155 per trade and we can confirm this by taking a look at the Greeks the Delta is negative so it is a bearish short position now because the value of this trade is not as high as the first trade we are still leaning bullish for our overall strategy and that is why not only did we have this hedge you can see at the 32 strike calls we have a buy position here so we also have these 32 strike calls that we bought to open and so when we add this to our trade you can see what our strategy looks like over here where the share price of a firm goes up it becomes profitable if it goes down we will be at a loss however we are hedged because you can see that the loss is is reduce you can see here our loss on the blue line over here is -63 if we drop down to $25 or if we drop down even more it is around this price level it the loss is much less than if we did not have this calendar hedge you can see if we were trading around this level you can see the loss is a lot greater a 238 which is the entire cost of the trade for our long calls here so you can see the value of hedging with these puts where we can reduce our risk to increase the probability of profit when we trade especially for earnings events which are higher risk and even with these puts we are still going bullish long on a firm because you can see our Delta is still positive our net positive Delta on this trade because we are going long bullish but we are hedging to the downside to reduce our losses because of the higher risk from earnings now we mentioned there was a a third unusual trade that was not very obvious on the option time and sales tape and so this was the third trade it was a longer term trade for June 2025 options notice here at the 50 strike calls 7,847 open interest and if we take a look at the trades at this option for June 2025 notice at the 50 strike calls there was only 1,700 open interest and so the fact that those trades added to the open interest here means that they were opening trades and that is why it's called open interest because they are interested in this strike price and opening new positions and so that is why we are also in this position buying these longer term 50 strike calls that expire next year in June and so when we Analyze This trade if can see that it is also a long bullish strategy that increases in profits as the share price goes up and it is a loss if it goes down and we can confirm this with the Positive Delta and So based on our analysis of all three of these trades we are going long bullish on a firm because the wealthy investors who could be possible in insiders are also more bullish than they are bearish but as we mentioned this is an earnings trade so there is higher risk so we use position sizing to manage our risk we put most of our capital in the trades that have lower risk and a higher probability of profit if you want access to those we'll put a link at the top here to our website let us know in the comments below do you you think a firm will continue to go down lower after earnings following this trend down or will we break out of this trend as usual please smash the like button subscribe if you haven't take care and have a wonderful day