Part 1: Unusual Options Volume & Other Clues in - The Stock Replacement Covered Call Strategy For Investment Stock Options

Sometimes, Wall Street has a very convoluted way of looking at things. For instance, consider the term “smart money” in reference to investment stock options. One would think the term “smart money” would refer to a professional investor with incredible talent for buying and selling investment stock options or a fund manager, market strategist or analyst that has had consistent success over different market scenarios, spanning many years in the investment stock options market.

Or perhaps an trader/investor who has an intimate knowledge of the investment stock options and has mastered the tools of his trade, including technical and fundamental analyses, hedging and option theory, and an expert knowledge of the global economy.

Wouldn’t this definition be a better fit for the term “smart money”? Maybe, but not in Wall Street’s eyes. On Wall Street, the term “smart money” refers to someone with ‘privileged’ information, who uses it to their advantage. This person, fund, or group doesn’t necessarily have any special ability, talent or expertise when it comes to investment stock options.

They only know something that the public has not been made privy to. They have a piece of insider information that they sometimes use illegally to profit in investment stock options. It happens all the time. So, on Wall Street, “smart money” is often synonymous with cheating or illegal activity.

For many years, most professional traders and even individual investors have studied long and hard in order to acquire skills in investment stock options that would aid them in their quest to be better, more competent at trading investment stock options. However, not having access to the same level of information as ‘smart money’ sometimes puts the retail investor at an extreme disadvantage.

A person with insider information has a crystal ball. He knows the outcome for investment stock options before trading has even begun. The SEC has rules in place to try to prevent this from happening but these rules haven’t eliminated the problem because the SEC cannot always ‘prove’ their case. Therefore, there is still a lot of “smart money” out there when it comes to investment stock options.

Most “smart money” investors who trade investment stock options try to keep a very low profile for obvious reasons. The easiest way for them to do this is in the investment stock options market where there are fewer participants thus fewer eyes and ears to notice any unusual trading.

Further, the investment stock options market offers much greater leverage, allowing “smart money” to reap even greater rewards. For example, If you knew that certain investment stock options were going to report bad earnings, and you knew this ahead of the ‘market’, it would be much cheaper and more profitable buying puts in the investment stock options market as compared to just shorting the investment stock options.

This is exactly what happens, and it happens more than you think. The game is always easier when you know the outcome before everyone else, and these ‘smart money’ players are out there making fortunes in the investment stock options markets because they know what you don’t.