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If you've been paying attention to the stock market over the past year, you know that it had a pretty great run. Stocks are up 22% since this time last year.
And now that we are in earnings season, Wall Street is looking for the good news to keep coming. But that doesn't mean just buying any call option ahead of an earnings report. That's a recipe for failure.
Options do take a little effort to master, but if you do your homework, you'll be well ahead of the game.
And that means you will be on your way to making money.
Today, we'll show you exactly what you need to know to make money with options trades during earnings season, including one stock we're eyeing for a trade…
The Key to Options Trading Success
Think about it. Many investors spend more time picking out a restaurant than researching an investment. And the same goes for options. If you know what you are doing, you should be able to consistently make money.
You don't have to go it alone, either. Money Morning's options trading specialist, Tom Gentile, is an expert in uncovering patterns in the stock market that recur year in and year out. If you can find stocks that are already in a trend, whether they're heading higher or lower, you can buy or sell with confidence. Further, Tom's research digs deep to find real trends that aren't obvious yet.
Right now, Tom sees bearish trends in three specific stocks that you can exploit for profit using a basic options trade. And the best part is that you can jump on them before the rest of Wall Street realizes what's happening.
Sure, you could have cashed in on Tesla Inc. (NASDAQ: TSLA) if you saw it a few months ago, before it tripled. Or Boeing Co. (NYSE: BA) before it slid 18% from its September 2019 high. Those big-name trades are trains that left the station long ago.
Instead, let's focus on stocks that haven't made their moves yet.
Tom looked at S&P 500 stocks and noticed that 47 of the 500 were at 52-week highs. And nearly half were at or above 90% of their 52-week ranges.
In other words, a lot of stocks have rallied sharply, and very few have been left behind. That means there is little room for the natural rotation from winners to losers to sustain the current trend without some sort of downside reaction.
Of course, stocks that have been so strong tend to stay strong, so any correction could be mild. And stocks that were weak don't have all that much to lose. That's why Tom focuses on the stocks in the middle of the pack. These are the ones that could move the most if their earnings reports are anything but perfect.
And one stock looks especially juicy as a short-side play.
Here's the stock – and how you can cash in with a simple put options trade…