Don't Be Scared of a Dropping Stock - Do This Instead

On Monday, Apple Inc. (NASDAQ: AAPL) announced that it expects revenue to suffer this coming quarter - news that caused the stock to open a full 3% lower Tuesday morning.

And AAPL is just the beginning. Revenue across multiple industries is about to feel the effects of COVID-19, aka the coronavirus.

As the second-largest economy in the world, China produces over $25 trillion in products a year. Pick up any product on your desk right now - a stapler, a pen, even your keyboard - and it probably says those three little words, "Made in China."

But the country's economic growth has hit a major roadblock with the coronavirus.

As the pneumonia-like virus continues its rapid spread through China, revenue will suffer. Which, in turn, could pull stocks in world markets down drastically.

In fact, it already has...

But I'm not writing this to scare you. There's no reason to be fearful.

Today I'm going to show you the best way to deal with a dropping stock and protect your portfolio...

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How to Double Your Money on Stocks That Fall

Tech companies like Apple are getting a lot of China-related attention now, but they're not the only industries being hit.

China is the biggest importer of oil and gas in the world. As a result, a few leading companies have been hit this year:

Cimarex Energy Co. (NYSE: XEC): -25.75%

Marathon Oil Corp. (NYSE: MRO): -19.88%

Apache Corp. (NYSE: APA): -18.55%

The coronavirus is also limiting travel to and from, as well as within the country. That further affects oil and energy stocks - but also cruise ship and airline companies.

American Airlines Inc. (NYSE: AAL), for example, has been in a sharp decline since Jan. 8, 2020, and is currently trading below its 50-day and 200-day moving averages. And these cruise lines have had a rough start to the year, as well...

Carnival Corp (NYSE: CCL): -15.16%

Royal Caribbean Cruises Ltd. (NYSE: RCL): -14.89%

Norwegian Cruise Line Holdings Ltd. (NYSE: NCLH): -9.40%

Stocks are dropping - that much is clear. And the coronavirus is spreading further and wider every day, threatening to reverse the current bull market with the most volatility we've seen all year.

But like I said, this doesn't need to be scary. A dropping stock isn't something to fear; it's an opportunity to profit.

And stocks like the ones I've listed above are set to help you make gains. So here are two ways you can profit on a stock that's falling:

No. 1: Short the Stock

"Shorting" is selling the stock first and buying it back hopefully at a lower price.

This isn't for everyone. It requires margin and can be expensive.

Now if you can handle the higher risk that comes with shorting a stock, then it can be very rewarding and offer big profits.

However, when you're trying to defend your portfolio and avoid as much risk as possible, such as right now, then there's a safer strategy out there...

No. 2: Buy Put Options

The better option here is puts.

Buying a put option gives you the right to sell a given stock at a certain price by a certain time. Put options offer leverage, higher returns, and lower risk.

If you're unfamiliar with exactly how put options work, I've detailed that right here.

When you're ready to buy, consider the 60- to 90-day out-of-the-money (OTM) puts. "Out of the money" simply means the current price of the underlying stock is below the strike price of the option.

For example, you can buy a Carnival Corp. CCL April 17, 2020 $40 put for $1.60, a total $160 investment.

With just a small move to the downside, this put will double your money.

So you see, there's really nothing scary about dropping stocks if you know how to play them. You'll not only protect your portfolio and money, but you'll also make money no matter what happens.

I'll be sure to keep a close eye on the market in the coming weeks in order to provide you with the latest updates and strategies so that you're always prepared.

Now, the broader stock market may be falling. But one market in particular is hitting its stride - cannabis.

You see, in the past few months, a new way to make money off the cannabis market has unfolded - a strategy that my data shows could turn a small stake into $15,424 in just four days.

Now, this is different than traditional stock trading.

In fact, it would've taken 20 times the initial investment to see that kind of payday on a stock... and although this idea is new in the world of cannabis investing, it's a system that's been around since Ancient Greece.

To find out how you can take this sort of profit potential into your hands, just click here.

About the Author

Tom Gentile, options trading specialist for Money Map Press, is widely known as America's No. 1 Pattern Trader thanks to his nearly 30 years of experience spotting lucrative patterns in options trading. Tom has taught over 300,000 traders his option trading secrets in a variety of settings, including seminars and workshops. He's also a bestselling author of eight books and training courses.

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