Start the conversation
Now is the best time to start adding puts to your portfolio.
The markets may have slid a bit yesterday off of worrisome coronavirus headlines, but the tides haven't shifted just yet from the recent optimism that's been driving stocks higher. But when they do, the bearish plays you snatched up now – just ahead of the curve – will come out on top and then some.
And right now, a sector of the market I'm expecting to lead the market lower in the next mass sell-off is defense…
But as I always say, for traders there's always an opportunity to profit, if you just know where to look. And as defense stocks continue their downward trend, I've pinpointed one stock primed for a put option trade.
This stock has been losing steam over the past few weeks, and technical indicators suggest this is only the beginning for this stock's downward spiral.
Most other market analysts have a positive short- to mid-term outlook for this stock, considering the rising geopolitical tensions overseas. As Russia continues to test U.S and Canadian borders in Alaskan intercontinental airspace, China arms itself for conflict in the South China Sea, and Saudi Arabia continues adding pressure to the ever-controversial oil market, many investors expect the defense sector to have a booming Q4 and beyond.
But they're forgetting two very important variables here, the first being the political climate…
We're coming into an election year where the previously big-ticket defense sector will likely take a back seat on all platforms across the political spectrum. Defense spending won't be winning any favors with the public this election season, in the wake of widespread civil unrest, leaving big defense stocks to flounder.
Second, we're taking earnings season into account…
Companies across the country are preparing to issue Q2 earnings reports, and the general consensus isn't promising – we're likely to see the full impact of COVID-19 on this second round of 2020 sales, and defense manufacturers are no exception to generally low expectations.
The stock we're trading today is scheduled to release earnings later this month, and we're likely to see this stock get torn apart by short sellers leading to the official statement, simply based on anticipated losses alone. Even if it does manage to pull off a miracle on earnings, investors are likely to remain skeptical.
For so many reasons, I think it's pretty clear why I'm recommending we go short on this stock today.
Check out the full trade details in this, my latest edition of "Fast Profits with Money Morning"…
Your Next Double Awaits…
Action to take: Buy to open RTX Nov. 20, 2020 $60 put using a limit order of $6.25.
As Raytheon continues its trek lower to my $50 target, this put option could help you to double your money or more.
But this isn't your only shot at 100% gains, even in this uncertain market…
In fact, readers of my colleague D.R. Barton, Jr., did so four times in five days last month. Since the beginning of June, D.R.'s readers have had access to eight triple-digit winners – as high as 306%.
They do it by exposing some of the darkest, most mysterious corners of the market.
About the Author
Chris Johnson is a highly regarded equity and options analyst who has spent much of his nearly 30-year market career designing and interpreting complex models to help investment firms transform millions of data points into impressive gains for clients.
At heart Chris is a quant - like the "rocket scientists" of investing - with a specialty in applying advanced mathematics like stochastic calculus, linear algebra, differential equations, and statistics to Wall Street's data-rich environment.
He began building his proprietary models in 1998, analyzing about 2,000 records per day. Today, that database, which Chris designed and coded from scratch, analyzes a staggering 700,000 records per day. It's the secret behind his track record.
Chris holds degrees in finance, statistics, and accounting. He worked as a licensed broker for 11 years before taking on the role of Director of Quantitative Analysis at a big-name equity and options research firm for eight years. He recently served as Director of Research of a Cleveland-based investment firm responsible for hundreds of millions in AUM. He is also the Founder/CIO of ETF Advisory Research Partners since 2007, noted for its groundbreaking work in Behavioral Valuation systems. Their research is widely read by leaders in the RIA business.
Chris is ranked in the top 99.3% of financial bloggers and top 98.6% of overall experts by TipRanks, the track record registry of financial analysts dating back to January 2009.
He is a frequent commentator on financial markets for CNBC, Fox, Bloomberg TV, and CBS Radio and has been featured in Barron's, USA Today, Newsweek, and The Wall Street Journal, and numerous books.
Today, Chris is the editor of Night Trader and Straight-Up Profits. He also contributes to Money Morning as the Quant Analysis Specialist.