Etsy Stock Is a Prime Target for This Options Trade

Etsy stock has been one of the big winners of the work-from-home trend this year, but it's gotten swept up in the latest tech sell-off.

We're not worried about that - in fact, that's creating the perfect environment for trading options on Etsy.

Many investors think about October as the scariest month of the year. However, when we look at the data, September usually has the worst record. The Stock Trader's Almanac says that September is the weakest month, and it's the only month with an average negative return over many decades.

And right on cue, September started with a bang. The Dow Industrials fell 6% between Sept. 2 and Sept. 8.

But the thing is, volatility, like beauty, is in the eye of the beholder. Options traders live for volatility. And volatility is what makes stock and options prices actually move.

Money Morning Quantitative Specialist Chris Johnson says "volatility" is Wall Street's fancy word for "movement." You need stocks to move to make money. Most investors usually think they will lose money when the market is volatile. That's just because they are buying and selling the wrong things.

We know the long-term trajectory of the stock market is up. And a shakeup like this sell-off is the perfect opportunity to turn short-term volatility into big-time profits.

That's why we're zooming in on Etsy Inc. (NASDAQ: ETSY) today.

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Chris has been telling readers about the opportunity in this stock for months, and if you missed out on its runup this year, the tech selloff is giving you another crack at it. This is one of those "stay at home" stocks that thrived during the lockdown, and now this e-commerce champ is pulling back from its recent highs. It tumbled 15% over the last month.

That's not going to last.

And it's the perfect opportunity to use an options trade to ratchet up your gains.

Here's exactly how to do it...

The Best Options Trade on Etsy Stock

Etsy manages an online marketplace that brings buyers and sellers together. It specializes in handmade products such as shoes, clothing, bags, and accessories. Since the March low, the stock gained back not only what it lost in the sell-off but triple that amount. That kind of performance ranks it among the hottest stocks this year, and it also tells us that this stock can move!

Chris also thinks its run is not over, and once the market finds its legs again, he sees it moving 25% higher. But we can really leverage that with a call option.

The stock trades around $113 a share right now, so a good option to choose is the Jan. 15, 2021, call with a strike price of $130. The January expiration gives the stock, and the market, a little time to sort things out. This option closed Thursday at $18.70, so the total investment, not including any commissions, would be $1,330 for one option contract that controls 100 shares of Etsy stock.

Compare that with buying 100 shares of stock outright for $11,620. If Etsy hits Chris' target, the option could double or triple in a matter of weeks.

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