The stock market offers ample opportunities for those ready to run risky trades, and this trader was prepared to risk it all with his bet, which paid off and turned a $150,000 investment into $3,000,000 in just 30 minutes.
Namely, a Reddit user under the username u/Fausterion18 shared his trade on r/wallstreetbets, showing how Nasdaq-100 (NDEXNASDAQ: NDX) options trading unfolded.
Explaining the trade
The trader invested $150,000 to purchase 300 options contracts on NDX during the final hour of the trading day, all expiring on the same day. Each contract allows the holder to buy 100 shares of the stock at a specified price, resulting in a total potential purchase of 30,000 shares for the trader.
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Essentially, the trader spent $150,000 to acquire the option to buy 30,000 shares of NDX, with no obligation to do so if they choose not to exercise the options. This means that the trader effectively invested $150,000 to potentially gain from any increase in the price of NDX during the last hour of the trading day.
Analyzing the performance of NDX on that particular day, it can be observed that the index was at 17,334 just 50 minutes before the market closed but then rose to 17,428 by 20 minutes before the close.
This increase amounted to $94 per share, multiplied by the 30,000 shares the trader was exposed to, resulting in a total gain of approximately $2.8 million.
What would happen in a negative scenario?
However, had the price of NDX remained the same or declined below 17,334 for the remainder of the last hour, the trader’s initial investment of $150,000 would have become worthless.
Essentially, this was a speculative investment costing $150,000, with the expectation that the price of NDX would increase within the short timeframe of approximately 30 minutes.
This trader took a calculated risk, which could turn out wrong rather easily, which is why these trades carry an added portion of the risk. However, in this instance, it paid off.
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Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
