Over the past two months, "too big to fail" stocks like Facebook Inc. (NASDAQ: FB), Apple Inc. (NASDAQ: AAPL), and Alphabet Inc. (NASDAQ: GOOGL) have received some pretty bad haircuts.
But just like my accidental seventh grade bowl cut, it will grow back. What sounds like bad news now won't last for the long term. In fact, this blue-chip stock pummel spells huge opportunity.
You see, these companies are among the most successful companies in the world. They are at the heart of American commerce, and although they've been beaten up badly, they will recover to normal levels in due time.
But you don't have to wait until then to profit. You can get paid big today to buy these stocks at bargain prices - lower than where they sit now - by selling put options...
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These Blue-Chip Stocks Are Ripe for the Picking
A put gives you the right to sell a stock at a particular price. Buying a put option is like buying insurance. For example, if XYZ stock is trading at $50, you could buy a $50 put that gives you the right to sell XYZ at $50. Should XYZ drop to $40, you could exercise your right to sell XYZ at $50 - just like an insurance policy. You're "locking in" your stock's value at $50.
Of course, buying an insurance policy costs money. And so does a put option. The cost of a put option is called the premium.
And remember - when you have the right sell, there has to be someone else who has the obligation to buy.
If you buy an auto insurance policy, you effectively have the right to force the insurance company to buy your car from you in the event of a total loss. The insurance company has the obligation to do so.
In the options world, you can take the role of the insurance company by selling puts. This leaves you with the obligation to buy stock.
And as long as you sell puts on stocks you want to own, you're set. By selling a put, you're obligating yourself to buy it at a price that's even lower than it is today... and get paid to do it!
Take a look at this example on FB...
FB is the top social media company in the world. It has dropped from an all-time high of $224.20 to a recent low of $137.20. That's a 39% haircut!
Although it's risen since the recent bottom along with the rest of the market, it's still likely that it will drop again as poor earnings across the board are announced this month.
The first thing to do is take a look at what I call a payday chart.
A payday chart illustrates how expensive options on the stock are. Similar to buying hurricane insurance as a hurricane approaches, put options (insurance policies) currently carry a higher premium with all of the recent FB volatility.
As you can see, the option premium normally hangs out around 24. Currently, it's all the way in the 40 range, a lot higher than normal.
As you can also see, premium was even more expensive when FB bounced off its recent lows last month.
Next, we can use statistics to see how low FB may go over the next few months.
The following probability band chart illustrates that FB will drop no lower than $140 with a 95% statistical probability. It also corresponds to the recent low, which is also strong support.
This is an excellent place to sell a put, obligating oneself to buy FB at the perfect bargain basement price of $140.
Then, there's just one thing left to do. Sell the puts and get paid.
As I'm writing, the FB June 19, 2020 $140 puts are going for $2.60. With each put controlling 100 shares, selling just one of them would put $260 into your account instantly. Ten would mean $2,600.
This money is yours to keep. You don't even have to buy the stock today.
If FB drops to $140 or lower on June 19, 2020, you will end up purchasing the stock at $140. One contract of 100 shares will obligate you to buy 100 shares for a total $14,000 investment. Remember - that's on a stock that will likely return to its recent all-time high once the coronavirus is contained and life returns to normal. One-hundred shares at recent highs would be worth $22,420 - or $8,420 higher than your purchase price.
Managing this trade is simple. You don't have to do anything. If FB stays above $140 by June 19, 2020, your put will expire worthless - and you've netted $260 for each contract you sold.
If FB drops to $140 or below, you end up owning the stock at a bargain basement price of $140.
When FB returns to recent highs, for just one put contract sold, you'll make $8,420 on your shares. If you just sold one put, then that, coupled with your put premium of $260, will net you $8,680 on your $14,000 investment... a 62% return.
See, this strategy isn't like any other trading strategy I've shown you before. Not only does selling puts have the potential to hand you a fast cash payment - it can also help you build generational wealth that can never be taken from you.
And here's the best part...
You don't even have to do the work to find these stocks.
I have isolated 100 blue-chip stocks for you - each one perfectly set up to deliver big, instant cash payouts. And you can receive detailed instructions on exactly how to take advantage every single week. Click here for all the details...
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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.