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You've probably been taught that when the price of a good, like a bicycle, goes up, people tend to buy less of it. And when the price goes down, people will buy more of it.
But it's just the opposite in the stock market.
Traders flock to high-priced stocks that they would not touch when its price was falling.
And we can take advantage of that phenomenon with a simple options strategy. Today, we'll show you exactly how to use that strategy on Robinhood or WeBull to build the perfect options trade. This trade could double your money in a hurry while protecting your downside risk. It's easy enough to do for traders of all skill levels too.
Here's what makes this strategy so powerful…
This Signal Shows How to Build a Profitable Options Trading Strategy
Just like in the physical world, stock prices can have momentum. Stocks that are already moving higher tend to keep on moving higher, and stocks that are already moving lower tend to keep moving lower.
That sounds counterintuitive, but it's one of the simplest trends to spot. Investor A makes money so investor B buys. Then they make money, and now investor C wants a piece of the action. And that is where we get the old saw, "The trend is your friend."
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.
That is why the concept of a 52-week high is so pervasive in the market analysis world. If a stock is at its highest level over the past year, chances are it is strong, has upside momentum, and will make higher highs.
But many investors are scared away by 52-week highs. They believe when a stock is as high as its been in a year, then it must be expensive. Expensive stocks often get sold by skittish investors.
But again, the stock market does not work on logic.
Think about what it takes for a stock to reach its highest level in the past year. It is very likely in a rising trend, meaning demand for shares is outstripping the supply of shares for sale. Unless something acts on the stock, like a weak earnings report or some negative news item about the company or CEO, momentum will carry prices even higher. It is simple physics.
Now, we're using that trend to make the best options trade you can do right now…