The Dow lost over 1,000 points on Monday. South Korea announced 700 cases of the COVID-19 coronavirus. Turkey closed its border with Iran. Italy is in a panic.
But that doesn't mean you have to panic yourself. We have an options trading strategy that could double your money in a week if things continue as they have.
Tom Gentile, Money Morning's options trading specialist, helped our readers make 360% gains from the most recent drop. He shared the pick with our readers last week.
And we're going to use Tom's strategy to make even more profit.
The Dow hasn't lost 1,000 points since 2015. But while all the chicken littles run around crying doomsday, you can actually take charge and win from these nasty market slides.
We'll show you the play for this week. But first, here's how last week went down.
The 360% Options Trading Strategy
Instead of buying shares of a stock, Tom bought put options that were poised to go up in value as the stock price went down. He focused on stocks most affected by the crisis, with out-of-the-money put options expiring within 60 to 90 days.
The travel industry has been hit hard by the virus, so Tom looked at Carnival Corp. (NYSE: CCL) and noticed it had lost a whole 15.16% on the year.
So Tom pinpointed the Carnival Corp. CCL April 17, 2020 $40 put for $1.60. That's a put option on Carnival cruises with a $40 strike price and an April 17 expiration date.
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If you bought that put option contract, it cost you $160 ($1.60 x 100 options). That turned into a $5.30 contract this week after Carnival shares plunged 17% more - a 306% gain for anyone holding those contracts.
But that's just one options trade in a gold mine of others with the markets in a frenzy.
Now you've read about what happened last week, here's how you can be part of the action...
The Best Options Strategy Right Now
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The options play on our radar this week is Marathon Oil Corp. (NYSE: MRO).
Because the travel industry is down, oil demand is also hitting a low. WTI Crude has gone down 19% since the start of the year, from above $60 to below $50.
And Marathon has lost 18% in the last five days.
It's trading a 52-week low of $8.82. But it doesn't look like it will rally back to $10 any time this week.
Before this stock sinks any further, you should think about buying a put option with a strike price of $10, expiring April 17, 2020.
These go for $1.45 today. Multiply that by 100 shares, and that's a $145 investment - even less than the $160 investors paid for last week's Carnival options play.
But it's the same profit potential, because it's following the same trend.
The travel industry is in for a period of stagnation. World leaders have just started talking about cancelling the Olympics.
Since Marathon stock has already shown itself tethered to the broader market fears of the coronavirus, it will continue to sink as travel barriers go up.
And when it does, you could double your money.
Action to Take: Find a stock that's been hit hard by the coronavirus. If you think it's going to go down, snap up some out-of-the-money options on the stock. Marathon Oil Corp. (NYSE: MRO) could be one of these. Check out the Marathon Oil Corp. MRO April 17, 2020 $10 put for $1.40.
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About the Author
Mike Stenger, Associate Editor for Money Morning at Money Map Press, graduated from the Perdue School of Business at Salisbury University. He has combined his degree in Economics with an interest in emerging technologies by finding where tech and finance overlap. Today, he studies the cybersecurity sector, AI, streaming, and the Cloud.