The Best Bullish Options Trade Right Now

The market has been on a white-hot tear since last week. The Dow surged 7% higher in that week and kicked off Monday of this week with its biggest rally in five months.

Wall Street is suddenly optimistic again with the election over and a vaccine candidate on the horizon.

Smart traders are taking advantage of this sudden change in sentiment by targeting call options.

But just buying call options right now can be expensive. You can do better. We'll show you how with our best bullish options trade right now.

Why Options Trades Are Profitable Now

Even before the ballots were cast, the market began to rally and in a big way. Four of the last six trading days were hugely bullish affairs that showed that stocks where once again the place to be. Sure, things can become overheated and nobody is promising a smooth, straight-line path to higher highs, but any pullback now looks to be a buying opportunity (as long as the market's internals remain solid and news concerning the pandemic - and its potential vaccines - does not get in the way).

The best way to take advantage of the new market strength is with options. Forget their old image of being only for high-risk speculators. Options, when done properly, can be part of a conservative investment plan because they offer higher returns with lower up-front costs.

But you can't just sit down at your trading app and buy whatever call options you see first. You need to do some research. This is where we can help.

Money Morning's options trading specialist, Tom Gentile, has been cataloging the market's tendencies over the span of his long career. He developed the Money Calendar, his proprietary tool that crunches through 10 years of data on 250 stocks and ETFs, to alert him when it is a good time to buy and when it is a good time to sell.

And it's telling him right now is an extremely strong, seasonally bullish time of year. It may not track exactly like other years have done, thanks to the extremes caused by the pandemic, but it is hard to argue with the market's own data.

The market's reaction on Monday to news of a potential vaccine shows just how much it is ready to take good news and run with it. Even with some uncertainty still lingering, the bias is to the upside this time of year, and that means implementing bullish strategies.

We'll show you exactly how to do that with our bullish options trade.

This one cuts your cost so you don't have to overpay as traders flood back into the market.

And it gives you immediate upside...

The Best Option Trade to Make Now

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So far this month, the Money Calendar has been spot-on. And the good news is that it sees green ahead for the next three weeks, including for Tom's best pick, Alibaba Group Holdings Inc. (NYSE: BABA).

Some people think of it as the of China, so right away we know this company is in the right place at the right time. But the Money Calendar shows the stock historically performs well in November. During the period beginning Nov. 9, bullish 10-day bets on Alibaba have paid off more than 90% of the time.

In other words, it's time to strike while the iron is hot.

Unfortunately, BABA happens to be one of the highest-priced optionable stocks out there, so just buying calls is an expensive proposition.

You could sell puts, which would be cheaper, but just outright selling puts, called naked puts, is a risky strategy. You could be on the hook for buying hundreds of shares of BABA for above market prices.

However, there is another easy way to be bullish and cut your cost down significantly. It is called a credit spread, and it also lowers your risk considerably.

Here's how it works: You could buy a Nov. 20, 2020 BABA $295 put and simultaneously sell a Nov. 20, 2020 $305 put. When you open the trade, the money you get for selling the higher-strike put is greater than the money you pay to buy to lower-strike put. That results in a net credit in your account.

In other words, you get paid to trade. And not only that, your downside risk is limited. The put you buy covers the put you sold.

As long as the stock rallies to $305 by expiration, you get to keep all the money. If it doesn't, then the most you can lose is the difference between the strike prices ($305-$295=$10) less the money you received up front. It does not matter if Alibaba goes bankrupt (which it won't). Your risk stays the same, and you make money if Alibaba moves higher, as the Money Calendar suggests it will.

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