Yesterday, stocks took a hit following the growing concern of an economic overheating.
The Nasdaq dropped 2.5% as investors continue to sell off tech stocks, and the S&P 500 fell over 1% by closing bell.
And I’m not seeing this pullback let up – at least not for the next two weeks.
Which is why today, I am going to show you a simple trading strategy to profit on the market movement before the end of the month.
You can use this strategy no matter your trading experience, and you have the potential to add profits to your portfolio in a matter of days.
To access this specific trade recommendation – with 100% profit potential – click here…
Put Options Are the Best Way to Profit on the Upcoming Market Movement
As you can see from the Money Calendar image below, the color scale ranges from bright green to bright red with bright green being the most bullish day and bright red the most bearish.
The S&P 500 has been historically more bearish for the first part of March and bullish to moderately bullish the last two and a half weeks of the month.
Now, there are two simple ways to profit on this market movement – trading call and put options.
Call options are bullish in nature, which means that the value of the call increases when the stock price increases.
An option controls 100 shares of stock for a fraction of the money needed to buy or short the stock. This reduces cost and risk in the trade.
The next questions to answer before buying options are:
- What strike price?
- What expiration date?
The strike price is the price at which you control the stock. The SPY has many strike prices to choose from. The option chain below shows a handful of strike prices down the middle with the call options on the left and the put options on the right:
SPY April 16, 2021 Expiration
The strike price closest to the stock price are called “At-The-Money” (ATM).
For calls, strike prices greater than the current stock price are called “Out-of-The-Money” (OTM). Strike prices less than the current stock price are called “In-The-Money” (ITM).
The opposite is true for puts.
For puts, strike prices less than the current stock price are called “Out-of-The-Money” (OTM). Strike prices greater than the current stock price are called “In-The-Money” (ITM).
For the best “bang for your buck”, it’s best to buy slightly OTM options. These options will generally provide a greater return than the other available strike prices.
I recommend buying options that are one to three strike prices OTM.
Now that we’ve identified which strike to buy, we next need to know which expiration to buy.
Currently, the SPY has many expiration dates to choose from.
I tend to recommend options that are 30-60 days away from expiration.
In the example above, we’re splitting the difference with a 45-day expiration date of April 16, 2021.
Now, if you want to place a simple trade that will pay out towards the end of the month, call options are the way to go.
But since the current market is bearish, if you buy a put option on the SPY and the SPY drops as predicted, your put option will increase in value in only a matter of days.
So, with a bearish Money Calendar sentiment as we head into the second week of March, here’s a great play:
Buy the SPY April 16, 2021 $385 Put
This put option is currently listed at $9.53. This means that you’ll control 100 shares of stock, and it will only cost you $953, which is also the maximum risk on the trade.
At the time of writing, the SPY is trading at $380 – which means you’d be paying $38,000 for the same control of 100 shares if you purchased the stock. So by purchasing the option, you’re getting the same control for a fraction of the price.
Now, if the SPY drops during this bearish market, this put option will increase in value.
Consider selling the option if it increases in value by 50-100%.
But despite this bearish projection…
If my three decades of trading have taught me anything, it’s that there’s always money to be made somewhere.
You just have to go outside the box, which is exactly what I’ve done with what could be my most successful trading strategy ever – the Money Hour.
In fact, on Wednesday, subscribers were quickly hitting profit targets all over the place… one in 28 minutes, and one in just 8 minutes!
Three days a week, I’ll walk you through exactly how to execute these lightning-fast trades on live Zoom calls – my next one is tomorrow morning, so if you want to be a part of the most successful wealth-building initiative I’ve ever created, click right here.
Talk soon,
Tom Gentile
