The market is increasingly unpredictable. We still don't know when the coronavirus crash will end or how bad it will get.
Believe it or not, there's a bullish trade tailor-made for this situation: selling puts.
The CBOE Volatility Index (VIX) daily average is above 30 right now, double what it was last year. With each day, it seems like the market makes less and less sense.
Stocks recorded a 25% climb over the last three weeks despite record unemployment. It can be hard to square depression-level economic numbers with a rally like that.
The wild market swings have driven options prices up too. Because there's greater chance of an options contract swinging into the money, traders are willing to pay more for it.
But you can get on the other side of that trade. Selling options can make for a big payday.
Of course, selling options comes with risk. But Money Morning's options trading specialist, Tom Gentile, is going to show us how to limit that risk and maximize upside.
Options 101: It's never been easier to learn how to trade options, especially with our free guide from top trading expert Tom Gentile. Click here to get it.
It comes down to just five stocks...
Tom already gave us an options strategy on the failing cruise industry this past February. Some readers earned 1,000% gains in a matter of weeks.
Now that the markets are more unpredictable, the strategy is different. But Tom's new approach could have even more profit potential, no matter the direction of the underlying stock.
In fact, it made Tom $14,288 instantly, and all Tom had to do was hit a few buttons...
Why Selling Puts Is Your New Strategy
Selling options can be risky.
If you sell a call option, you'll have to sell the underlying stock if it hits the strike price. And there's no telling how far above the strike it will go. You may have to sell the stock at much lower than market value. In that sense, your risk is unlimited.
Put options have the same risk structure. When you sell a put option, you may have to buy 100 shares per contract if the stock drops past the strike price. This can be a downer if you're not looking to own 100 shares of the stock. Your upside is also capped at the price of the contract.
But when you throw massive volatility into the equation, like today, it becomes a generational buying opportunity. And it's just a matter of targeting the right stocks.
For instance, the $14,288 Tom pocketed was courtesy of Microsoft Corp. (NASDAQ: MSFT). That means if the stock drops and the put is exercised, Tom is buying one of the best tech stocks to buy on the dip.
It's a win-win.
Here's how Tom played it - and how you can use this strategy to turn five stocks into $1 million...
Selling Puts Is the Best Options Strategy Against Volatility
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When you're selling a put option, a great way to make it work for you is to make sure the underlying stock is something you'd want to own at a discount.
Sell a put option with a strike price you wouldn't mind paying for 100 shares.
If the stock loses value, you'll just be buying it at the discount you wanted. If the price stays the same or rises, your profit is the premium.
This puts you in control of every aspect of the trade. You measure exactly how much money you want to spend before diving in.
After that, it's just a matter of knowing which stock options to look at.
Tom's been focusing on five specific stocks to make this happen. One of them is Microsoft, still with a potential $100,000 profit upswing - and that's on the lower end.
You really don't want to miss the rest of this strategy. Here's how you can begin executing these trades with Tom today.
This Fast Money Move Could Make You $4,238
America's No.1 Pattern Trader is going live on camera to show readers how they can make hundreds, even thousands, of dollars in extra income.
You see, he's found a way to predict the future buying patterns of nearly every stock on the market. And with this trick, he's lining up major payday appointments left and right.
We're talking about cashing in on some of the biggest stocks on the market: Netflix, Apple, Facebook, even Amazon.
The best part is this options trading strategy is super easy to understand and even easier to put into action.
All it takes is three simple steps, a few clicks of your mouse, and you're on your way to what could be life-changing wealth...
Click here to see how he does it.
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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.