The coronavirus just isn't going away, and Wall Street is taking notice. Stocks are starting to get a little bumpy as the VIX shot up 8% today alone.
But this is the primetime for options traders. A little volatility goes a long way toward making trades profitable. And that's just what we're looking for in today's best options trade. It's a simple trade easy enough to do on Robinhood or WeBull, but it could make you a 100% gain.
COVID-19 cases are spiking in places like Texas and Florida; two states that have completely opened back up since lockdown restrictions swept the country. Now, even more states are moving ahead with their reopening plans, and that means the chances for new hot spots increases, too.
With uncertainty building over the virus's renewed growth rate, some businesses are going to be hit hard if Americans bunker down again. Currently, an overwhelming 80% of Americans support stay-at-home orders and nonessential business closures. Even where economic restrictions have lifted, Americans are going out less frequently.
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The good news is that is the perfect environment to make some serious money with options.
Money Morning Quantitative Specialist Chris Johnson has zeroed in on one company that hasn't been able to get out of neutral and is due for more setbacks.
But by trading options, you can turn this company's weakness into 100% profits.
Check it out...
The Top Options to Buy on Robinhood
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Chris thinks L Brands Inc. (NYSE: LB) is set up for disaster.
Formerly known as The Limited, the company sells women's apparel and beauty products through very well-known brands, including Victoria's Secret and Bath & Body Works. Both names are fixtures in retail malls, which have been mostly closed during the crisis.
During the coronavirus crash, this stock lost a whopping 59.4% of its value. Not only that, but its deal to sell a 55% stake in Victoria's Secret to Sycamore Partners was scrapped, with the buyer citing L's massive layoffs and failure to pay rent during the COVID-19 crisis.
Despite that, the stock got an unexpected lift after the May retail sales report topped expectations. That lit a fire under many mall-based retailers, including some of the worst performers of the year. However, this awakening in what are essentially "junk stocks" seems to be fleeting.
Trading activity on LB and others shifted from growing buying interest to growing selling interest, as evidenced in how many shares change hands on up days vs. down days. In other words, selling activity has more urgency, and that does not bode well for the stock.
What that means for L Brands is that the time to pay the piper is coming. Chris forecasts the stock is headed to $10 a share.
And you can take advantage of that with a put option. From the Tuesday close of $14.69 per share to $10 is a 31.9% decline, potentially by the end of summer. Not too shabby.
But by now, readers know we like to juice things up with options. For that, we suggest the LB Aug. 21 $15 put, which closed Tuesday at $2.50.
Normally we don't buy in-the-money options, but the way this one is priced gives us a chance to add some gas to our trade.
If Chris is right and LB stock falls to $10 per share by the Aug. 21 option's expiration date, then the put will be worth $5. That's a 100% gain - and more than triple the percent gain compared to just selling the stock short. The market is volatile right now, so make sure you pay no more than $2.50 for the option unless you believe this stock is heading even lower than $10.
Remember, options can limit your risk since you can control hundreds of shares of stock for a fraction of the cost of buying them outright, but they still have some risk. Fortunately, all that you risk in this trade is the premium to buy the option.
And if you want more expert options trades, make sure you check this out...
Millennial Millionaire's One-of-a-Kind Trading System
It's been generating money hand over fist since the recession of 2008... and now, he's finally sharing the secret! Investors in today's economic climate need every advantage they can get, and I don't think I've ever seen a strategy more powerful than this. Click here for the full story and the next three plays he has his eye on.