In 2020, revenue from athletics in the U.S. was projected to be over $75 billion.
This was all before coronavirus took a hit on the world as we know it.
The 2020 Olympics has been postponed… which hasn’t happened since 1940 during World War II.
The Big-10 and PAC-12 just canceled their college football seasons in light of coronavirus developments with other conferences likely to follow.
MLB is being played in empty stadiums with crowd noise piped in and cardboard cutouts of fans in the stands.
The NBA has even gone so far as to create its own “bubble” with strict quarantine restrictions and no outside contact for the season.
Even the NFL, which is the biggest league by revenue in the U.S. bringing in an average of $13 billion a year, hasn’t announced any official plans on the season that is set to pick back up in a couple of weeks.
Sports used to be profit hotspots – there aren’t fans buying tickets or $10 hot dogs at games. There aren’t people spending money on jerseys or pay per view matches to see their favorite players in actions. And the sports world is seeing the impact.
Coronavirus social distancing guidelines have all but shut down sports, leaving not just leagues, but athletic companies gasping from the one-two punch of reduced revenues derived from sports.
But while these stocks are taking a hit, traders are reaping all the benefits.
Here’s how you can profit on the declining sports industry…
Coronavirus Decline in Sports Revenue = Big Profits in the Short-Term
I want to be at Yankee Stadium watching Judge hit a walk off home run as much as the next guy. But when life gives you lemons, make lemonade, right?
I’m always on the lookout for a trading opportunity. And the lack of sports just revealed a pretty big one.
Think about it – people are desperate for sports to come back. U.S. fans have taken to betting on Turkish basketball leagues and the NFL start date instead of the winning team. Even without the game, the demand is still there.
So, once the coronavirus is contained, there will be a swooshing sound as the sports world revives and money is poured back into this multi-billion industry. And sectors across the entire market will benefit from it…
Media companies like The Walt Disney Company (NYSE: DIS), which owns ESPN and AT&T (NYSE: T) which owns another sports broadcasting company Warner Media, will benefit when sports go back to a regular schedule.
Sports betting company, Draftkings (NASD: DKNG) will be another beneficiary as the amount of content to bet on returns.
Brand awareness and sales will return for apparel companies like Nike Inc. (NYSE: NKE) and Under Armour (NYSE: UAA).
And you can profit on the climb back up – but only if you get in now.
Let’s take UAA for example.
This Baltimore-based apparel company hit all-time highs back on September 17, 2015 when the stock traded for $52.05. UAA dropped to a low of $7.15 when the market bottomed out in March.
Take a look at the stock’s projection below.
Once UAA breaks above its 200-day moving average (brown line), traders can expect it to return to prior highs as shown by the graph above.
If you’re looking for a long-term play, then purchasing the stock outright would be a great move.
UAA is trading at $8.89 at time of writing. Purchasing the stock has the potential to yield a high return when sports pick back up and athletes are once again representing the “UA” on their uniforms.
But if you want to make money now, and you are anticipating that these athletic companies will move further to the downside in the fall with the loss of college and professional sports, then buying puts is the strategy to play.
A put option gives you the right to sell the underlying stock for a set price, and the option increases in value should the stock drop.
Here are some simple rules to get into these trades:
- Buy Out-of-the-Money Puts (two strikes below the stock price).
- Use 60-90 Day Options
For example, if you expected NKE to take a dip, you could buy an October 16, 2020 $100 Put for $258. Should NKE drop in the fall, this option will increase in value.
Take a look at the break down below…
This option will expire on October 16, 2020, so be ready to exit by then.
If you have a longer time horizon for the drop, simply buy more time. NKE has options that expire in January 2021 and even January 2022.
Put options profit if the underlying stock goes down with unlimited profit to the downside. If the stock goes up, the risk is limited to the cost of the option.
Options are one of the biggest wealth-building tools the market has to offer. You won’t find bigger or faster gains using any other strategy. And I’m not the only one who knows that’s true…
My good friend and colleague, Chris Johnson, is an expert technical trader. And he just perfected an options-trading strategy that could have successfully turned $5K into $100K in just three years.
And next week, he’s revealing exactly what that strategy is. Keep an eye on your inbox for more information!