How I Found the Trade That Made Me a Legend
Editor's note: In 2021, one trader saw what nearly everyone else missed – the spark behind GameStop's legendary short squeeze. In this issue, Masters in Trading founder Jonathan Rose joins us from our corporate affiliate InvestorPlace to share how his system flagged this move before the rest of the market... and how it continues uncovering major trades for his subscribers ahead of Wall Street.
Four years ago, I made the boldest call of my career on a stock the markets left for dead...
GameStop (GME) had been underwater for years. And 2021, the height of the "physical retail apocalypse," looked like the end.
The stock traded around $4.78 a share to begin 2021. Considering it had traded as low as $1 back in July 2020, no one was really paying attention.
Everyone thought it was dead money. But I saw something different...
What many didn't know was that the "smart money" was getting into position. Institutional traders were betting huge sums that the stock would crash even further.
And I was one of the first to know anything about it...
For nearly three decades, I traded options for the pros – whether on the floor of the Chicago Board Options Exchange or as the partner of a well-known bond prop firm.
It was my job to leverage the sort of intel institutional traders used to place huge, market-making bets.
So GameStop's massive trading volume grabbed my attention.
It's what I like to call a "big money tell" – when the smart money tips their hand through unusual options activity before anyone else knows what's coming.
Right after I spotted that tell, I noticed something else...
Another player was quietly piling into $5 GameStop calls. For folks new to options, calls are simply bullish positions traders take on a stock.
And that position told me the price was about to spike... hard.
So I recommended the stock to my followers. Keep in mind, this was well before the near-daily headline news bombs started coming out about the stock.
I knew I had spotted a massive trade in the options market before most people knew anything about it. It was powerful intel that I simply had to share with my readers.
And once I did, the domino effect was incredible...
The GameStop Pile-On No One Saw Coming
Day traders flocked to a Reddit page called WallStreetBets. And they all soon realized the same thing I did...
They figured if enough people got together and bought GameStop, they could "squeeze" the hedge funds out of their positions. That would force a massive run-up in the share price. Even Elon Musk encouraged his followers to buy more shares.
And then the unbelievable happened...
GameStop surged in the months following my video recommendation from $4.50 to $483.
That's a ridiculous 10,633% gain.
One of my YouTube followers, CDean30, put it perfectly...
You're the real one who predicted this, Jonathan. I'll admit it. I watched your video and have been playing it since AUGUST when you made the other video.
Our position in GME netted my viewers more than 202% in just a couple of days.
And for the so-called smart money, it was a painful lesson...
Melvin Capital, a hedge fund that took a massive short position in GameStop, lost 30% of its funds in less than a month. Two other famous hedge funds, Citadel and Point72, had to step up with $2.75 billion in capital to save Melvin Capital from collapsing.
That wasn't the end of the story, though.
I spotted another huge – and profitable – move back in 2022 that landed my viewers gains of more than 100%.
But I'm not telling you all this to brag. There's a lesson here that comes down to one approach every trader needs to know about...
How the Smart Money Trades
I'll put it in simple terms: Great trading is all about leveraging great intel.
I'm not talking about reading chart patterns or following the latest CNBC headlines. That's all surface-level.
I'm talking about the kind of insight that only institutional traders, hedge funds, and investment banks have.
GameStop's massive run was a perfect example. And leveraging that type of data was my job for 30-plus years.
My experience speaks for itself...
In 1997, I got my start as a floor trader at the Chicago Mercantile Exchange. I traded futures on the Nasdaq and S&P 500 during the dot-com boom and bust.
By 2003, I'd become director of trading at a leading proprietary trading firm. I left the floor to join a small group of traders focused on volatility in the bond market.
I was making markets for major players like Goldman Sachs – all while managing millions in capital from my own stable of traders.
But ultimately, I felt as if my best work was still to come.
I found myself thinking, "Why can't regular folks get in on these smart money buy signals?"
And that brings us right back to the tools traders use to spot these big moves in the first place.
I saw GameStop's big move because, 10 years ago, I hit on one really big idea.
I developed a software tool around a key market indicator. It's a tool that alerts us to the biggest trades changing hands in the options market ahead of the pack.
I call it the Unusual Options Activity Scanner. And it has seriously changed the game for my viewers...
Back in May, we landed a striking 44% gain on PayPal (PYPL).
Just a few weeks later, we rode a massive smart-money bet on Sibanye Stillwater (SBSW) to a 141% gain in just 39 days...
And we exited our position in Alignment Healthcare (ALHC) after less than a month for a near-200% gain.
And that major winning streak happened while the markets were melting down earlier this year.
But those aren't just once-in-market-cycle opportunities. The markets are handing us more opportunities like these as I write to you.
And if you know how to track real market flow – not the headlines, but the footprints that institutional players leave behind – it's possible to spot these opportunities even when chaos strikes.
Remember, the creative trader wins.
Regards,
Jonathan Rose
Editor's note: On Monday, three of America's top investors – Louis Navellier, Eric Fry, and Luke Lango of InvestorPlace – will make a bold new prediction. They're unveiling a powerful breakthrough that tracks Wall Street's hidden bets... and how it could supercharge three of their favorite stocks by 500% or more. For investors, this could mark the beginning of the most profitable stock market window in decades.