It has been statistically shown that the stock market can act as a crystal ball when there is an impending presidential election.
Analysts look at the three months leading up to the election to see if the president in office will stay, or if he will be sent packing –
In fact, before the 2016 election, the S&P 500 had an 86.4% success rate using this three-month strategy to forecast the election.
Today, we’re looking at a market correction six weeks before the election. Stocks were up following August’s stellar performance until Monday, when we saw the Dow lose over 500 points in a single day of trading, marking four straight days of losses.
But this month’s bearish movement isn’t necessarily the deciding factor for who our next president will be. Because if we know anything to be true, it’s that this year has been unlike any other…
The global pandemic created a snowball effect. World economies are still reeling from the coronavirus-inspired reductions in consumer spending. Retail, travel, and hospitality are taking it on the chin. Not to mention, the demand for oil has dropped along with oil prices.
It’s not surprising that the market has corrected. At the end of the day, the S&P’s predictive power may not be so strong in 2020. But regardless of who wins November’s election, it’s likely we’ll see more downside in the market before then.
That’s why I have found the top 10 bearish trades to play right now – and profit on before the presidential election, regardless of who sits in the White House next year.
You can get all of the details on these profitable opportunities by clicking here…
Profit on the Red Market Before the Election with these Option Trades
On Monday, we saw the stock market take a bearish fall, top indices seeing the worst days they’ve had in months. The S&P 500 saw a 10% drop from its peak high it hit on September 2, the Dow was at one point trading 780 points lower on the day, and the Nasdaq dropped 9.8%, its largest month-to-date drop since the 2008 financial crisis.
It was the fourth straight day of losses, and it set the month of September up for its worst day in 18 years.
All of this is indicating that the market may continue in bear territory for a while.
That’s why I made a list of the best bearish trades to play right now. Take advantage of the current market sentiment with these 10 option trades:
The S&P 500
The SPDR S&P 500 ETF (NYSE: SPY) is an exchange-traded fund (ETF) that tracks the S&P 500 at one-tenth the price of the index. It has been in a virtual freefall in September, and a greater move to the downside appears imminent.
The SPY acts just like a stock, which means it also has options contracts.
Here are three ways to profit:
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- Short Term – Credit Spread – Buy SPY Oct 2 $345 Call + Sell SPY Oct 2 $340 Call
I wrote about credit spreads last week, and the SPY is a perfect application. You can currently sell this spread for about $0.75 and keep this credit provided the SPY stays at or below $440 by October 2, 2020 – a high likelihood.
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- Medium Term – Long Put – Buy SPY Oct 16 $320 Put
This is a simple put trade. Currently, these puts are going for $5.25. Consider selling your positions when your money doubles.
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- Longer Term – Long Put Spread – Buy SPY Oct 30 $325 Put + Sell SPY Oct 30 $320 Put
This is a cheaper way to trade the drop, and it gives you more time to ride into the elections. Currently, this spread is going for $1.65 and will provide you a potential triple on your money.
Energy
The Select Sector SPDR Trust Energy ETF (NYSE: XLE) tracks the top energy stocks. If we see an uptick in coronavirus cases, there is a likelihood that energy demand could take just like it did in March when global oil prices saw a 65% quarterly drop.
Here are two ways to profit:
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- Buy XLE Nov 20 $30 Put
This put is currently trading for about $1.40. Consider selling it for a double with a decline in the XLE.
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- Buy XOM Nov 20 $35 Put
Exxon Mobile (NYSE: XOM) is the poorest performing energy company in the XLE and likely to move the entire sector lower. This put is currently trading at $2.30. Consider selling it for a double as well.
Real Estate
The Select Sector SPDR Real Estate (NYSE: XLRE) tracks real estate stocks and is the second poorest performing sector over the past three months. It is widely believed that the coronavirus-inspired contraction in consumer spending and incomes will have a detrimental effect on the real estate market, particularly the residential market.
Here are two ways to profit:
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- Buy XLRE Nov 20 $33 Put
This put is currently trading for about $1.00. Consider selling it for a double with a decline in the XLRE.
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- Buy EQR Nov 20 $50 Put
Equity Residential (NYSE: EQR) is a real estate investment trust that invests in residential apartments. It is currently one of the poorest performing stocks in the XLRE. This put is currently trading for about $2.30. Consider selling for a double.
Airlines
Moody’s predicts that commercial airlines will continue to be ravaged by COVID-19 and won’t recover until the end of 2023. With the coronavirus on the rise across the globe and the winter season approaching, air travel may continue to decline into the holiday season.
US Global Jets (NYSE: JETS) is an optionable ETF that provides exposure to the airline industry.
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- Buy JETS Nov 20 $15 Put
This put is currently going for $1.00. Consider selling it for a double.
Hotels
I haven’t been in a hotel all year and don’t plan to be, and I’m not the only one. Hotels have been decimated by a lack of guests. Even major hotels like the five-star Park Hyatt New York closed its doors due to the pandemic. With COVID-19 on the rise this fall and winter, it will only get worse.
Summit Hotel Properties (NYSE: INN) is a real estate investment trust (REIT) that owns select hotels in the upscale segment of the U.S. lodging industry.
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- Buy INN Nov 20 $7.50 Put
This put is currently going for $2.50. Consider selling it for a double.
Implied Volatiity (IV)
Options get more expensive when the market corrects. The average expense is quantified by the VIX, created by the Chicago Board Options Exchange (CBOE). The VIX rises when markets drop and vice versa. During the market crash in the first quarter of 2020, the VIX spiked up to 85.47. Given that the VIX is currently at 27, we could easily see another correction.
The iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX) is an exchange-traded note (ETN) that tracks the VIX short-term futures and has options.
1. Buy VXX Nov 20 $25 Calls
These calls are trading at $4.40 and, should we get a major correction in the market, could very well yield astronomical gains.
If you like specific, detailed trading recommendations like these, then I have some exciting news for you…
My colleague, Andrew Keene, goes live every morning from Monday-Thursday with a full breakdown of the market and his very best research…
And he reveals multiple trade recommendations with some impressive profit potential – all live on the call.
It’s one of your only chances to receive option trading recommendations, just like the ones I gave you above, in real time.
Click here to learn how you can join Andrew in his live trading room.
Talk soon,
Tom Gentile
America’s #1 Pattern Trader
