The market's officially in rally mode, with the Dow up over 7% in the last five days. That's great news for options traders, as we can ride this wave even higher.
Today's best options trade capitalizes on an industry about to see a summer surge, which means this renewed rally couldn't have come at a better time. And this trade is simple enough anyone can make it on a free platform like Robinhood or WeBull.
You see, one of the sectors that the coronavirus upended was real estate. Between fears over bringing the virus into your home and statewide lockdowns, homes coming to market plunged this spring. Home sales plunged 18% in April. When we were locked down in our own houses, then nobody could, or wanted, to go into someone else's house.
Now that science has a better handle on the virus and all of our masks and social distancing efforts seem to have paid off, people are more willing to get back out in the world. That's especially true now that statewide restrictions are easing. Americans are starting to return to normal activities, like getting a haircut, hitting the beach, and buying a house.
In the case of real estate, the suppressed market will erupt this summer and fall.
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All the people who were ready to sell this spring but couldn't due to the pandemic will start bringing their homes to market. And record low mortgage interest rates have buyers out in droves. New mortgage applications were only down 1.5% year over year in May, a sign buyers are lining up, just waiting for inventory.
That's great news for the stock we're targeting for today's best options trade. This company is instrumental in the home buying process, and as the real estate market heats up, so will its share price. Using a commission-free and easy-to-use platform like Robinhood, taking advantage of the coming boom is fairly straightforward.
And by using options, we can kick up the profit potential. Our experts have pinpointed exactly where this stock's price is heading and the best options to buy to make 300% profit...
The Best Options Trade on Robinhood Today
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From working at home to visiting Grandma via a virtual platform, some things are never going to look the way they did before the virus. And that includes looking for a house. Buyers can cover a lot of ground, so to speak, by starting their shopping online from the comfort of their couches.
That means companies that can list, show, and educate about houses will thrive. Money Morning Quantitative Strategist Chris Johnson thinks that this is the perfect environment for Zillow Group Inc. (NASDAQ: ZG).
Zillow is a real estate marketplace for buyers, sellers, renters and all types of information seekers. It can hook up buyers and sellers with agents and even help with mortgages by starting with its own home valuation tool.
Think of it as the one-stop shop for real estate.
Record-low mortgage rates will have people ready to buy. And while sellers have kept their homes off the market during the pandemic, as restrictions loosen and the economy rebounds, all those backed-up listings will start showing up in a hurry. That could make for a hot housing market through the summer.
Chris thinks that Zillow is heading to a price of $80 per share over the coming months, so we like the Aug. 21, $80 Zillow call option, trading for $165 a contract right now. But look out if it starts to trade for over $200 a contract. That could be a bit expensive for this trade.
The stock closed Friday at $59.32 but traded as high as $65.75 intraday. That high was right in the middle of a very important price zone between $65.50 and $66. Chart watchers call that "resistance" but you can simply think of it as a price area where people thought the stock was expensive. Shares of stock for sale swelled and price backed down.
This level goes back to the market peak in late February but also to the stock's previous all-time high set in June 2016. In other words, it has been keeping a lid on prices for years.
Now, if Chris is right and housing really heats up, the stock may punch through this level. Prices that previously were thought to be expensive would suddenly be thought to be cheap, and demand for the stock will really increase.
Since the option has the same strike, or exercise, price as Chris' target price, we won't be holding it until August. If the stock does break out above $66, it would not be a surprise to see it scoot higher quickly. That is the nature of breakouts when demand suddenly overwhelms supply. And the quicker that happens, the more the option price will increase. Therefore, look to hold this option only a few weeks.
If Zillow reaches Chris' price target of $80 by the start of July, you could unload the options for a 308% gain.
But don't stop there. You can have expert options trades delivered right to your inbox each week. In fact, Chris has an exclusive invitation for Money Morning readers.
Learn how you could capture 52% gains, 78% gains, and even 108% gains in a matter of days, right here.