The Best Options Trade Before the Election for over 100% Returns

Options traders love to target big events in the stock market. Rightfully so - knowing something is going to move the market should put dollar signs in traders' eyes.

And there isn't' a bigger upcoming event than the 2020 presidential election. We're targeting the uncertainty swirling around it for our best options trade right now.

The coming presidential election is creating all sorts of speculation and is distorting markets as investors, no matter what color their politics, fear the uncertainty.

Who will win, and how will they handle the economy and the coronavirus? These questions are hugely important for the stock market, and we simply won't know the answers until after Nov. 3.

But we can profit as the market reacts to the news.

We don't have to know which way the market will move as long as there are big swings coming. Using the right options strategy can help you profit from the volatility that is likely to build as the election draws near.

Money Morning's options trading specialist, Tom Gentile, has a trade that you can do right now. The best part is this trade doesn't rely on an individual stock to go up or down. All we need to see is volatility to continue ratcheting up ahead of the election.

Here's how it could double your money...

The Best Options to Trade Right Now

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It sounds too good to be true, but it really exists. And when the market experiences bouts of high volatility as it did in September and likely will in October, the best plan is to actually own volatility.

Remember that an important component of the price of an option is the level of volatility for the underlying stock or index. The higher the volatility, the higher the price.

It's simple, really. The greater the odds the underlying stock or index can move - i.e. volatility - to reach the exercise price of the stock or index, the more you have to pay for an option that controls it.

Most people watch volatility using the VIX - the Chicago Board Options Exchange Volatility Index. It has a really complicated formula based on near-the-money options on the S&P 500, but the most important point is that it moves higher when volatility moves higher, and lower when volatility contracts. Most of the time, volatility really expands when the S&P 500 is tanking. And when the index rallies, the VIX tends to move lower.

The next round of bad news, whether it be setbacks in the development of vaccines, another economic shutdown, or failure to reach a stimulus agreement in Congress, could send the already fragile market lower. If that happens, the VIX is likely to explode higher.

That's why Tom recommends looking at a call option based on the VIX itself. Why try to figure out which stocks will get hurt and which won't? Just own the volatility that will arise when the market starts to really move.

Here's what Tom recommends: Buy one VXX Nov. 20, 2020 $25 call. It closed Wednesday at $3.63, or $363 per contract.

This option is based on the iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX), which is an exchange-traded note (ETN) that tracks VIX short-term futures. The VXX closed at $24.90 on Wednesday, so this call option is just out of the money. Its strike price is below the underlying index price.

If the market puts in a "standard" correction, the option could easily double or triple in price. If the market collapses after the election, that could be a truly massive gain.

He Made Millions Trading for an Hour Before Breakfast

Andrew Keene was living with his parents. Two years later, he had $5 million to play with - all because of this one strategy.

The crazy thing is you can do it in less than 90 minutes a week.

To see how easy your life could be, click here.

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