Well, the “buy the dippers” are back in full force after bank earnings and Moderna (MRNA) vaccine news…
And it looks like this momentum can continue.
Of course, there are stocks I want to have a bullish position on, but they may be too rich at these levels.
I mean the dollar value on some of these stocks is insane and the options premiums are juiced.
I’m a firm believer that with all the traders who piled into the market recently, there are some “suckers” placing random bets.
Now, there is a way to take advantage of these “sucker bets” with defined risk…
And I want to show you the strategy I used to lock in $6K on two trades on Tuesday.*
On Tuesday, I noticed there were a lot of opportunities after it made a dip. I figured it was the same story over and over again…
Stocks take a drop and quickly rebound. That’s kind of been the theme over the last few months.
Once I noticed that I figured I would look to establish a bullish opinion on some names I’ve been watching.
However, there was still potential for a further dip. So rather than buying calls or shares outright in these names, I used what is known as a bull put spread.
Well, with a bull put spread, I’m essentially betting where a stock won’t go.
For example, Lululemon (LULU) was one stock on my radar.
If you look at the chart above, LULU was in a bull flag pattern on the daily chart, and there were key levels that could act as support.
More specifically, I was looking at the 34-period exponential moving average (EMA) as a key support level. The 34 EMA has held before, and I figured it would hold again.
Now, there were two ways to play this…
I could’ve sold the $295 puts, while simultaneously purchasing the $290 puts.
I could’ve sold the $300 puts, while simultaneously purchasing the $295 puts.
I opted for the latter trade.
By establishing that bet, I stacked the odds in my favor, in my opinion. You see, LULU could’ve dropped a little, or even stayed sideways, I was in a position to profit. If the stock popped, I would capitalize on the drop in the put premium.
Why did I opt for the $300 / $295 put spread?
I had a high conviction and wanted to get aggressive.
Well, that bet paid off… and I was able to lock in a 32% winner, or about $4,500 in realized gains in a matter of hours.
I also followed a similar approach with Match Group Inc. (MTCH).
The 34 EMA has held as a support level for MTCH multiple times over the last few months, and I figured that area would allow me to establish a bullish opinion.
With MTCH, I sold the $97 / $95 put spread.
Basically, I believed MTCH would stay above $97…
And in just a matter of hours, MTCH caught a pop, and I was able to lock in a 27% winner, or about $1,500 in realized gains.
Now, if you want to learn more about this risk-defined strategy that allows me to trade high-dollar names without breaking the bank…
Then you’ll want to check out my latest eBook, Wall Street Bookie.
Inside, you’ll find case studies on my number 1 edge in the options market, and the strategy I use to take advantage of the “sucker bets”.
*Results presented are not typical and may vary from person to person. Please review our full disclaimer located at ragingbull.com/disclaimer.