Best Call Options to Trade Now for 300% Profit Potential

With all the enthusiasm over a new vaccine, money is flooding back into stocks, but investors and traders alike are leaving profits on the table if they aren't trading call options on the right stocks.

Just look what happened in the market last week. Pfizer Inc. (NYSE: PFE), which has a 90% effective vaccine in the final stages of testing, announced that it was, in fact, 95% effective. That news bookended other news that Moderna Inc.'s (NASDAQ: MRNA) vaccine was 94.5% effective in trials.

That's poured gasoline on an already hot stock market. But just buying any old stock and hanging on for the ride isn't a profitable strategy.

Not in this market.

While the Dow Jones hit its all-time high last week, tech stocks have struggled. A vaccine means work-from-home darlings like Zoom Communications Inc. (NASDAQ: ZM) will see less demand. At the same time, the economy is yet to recover from the pandemic.

That's why you need to do your research on which stocks are going to ride the market higher and which aren't. That's where we come in.

While there is money to be made with Pfizer, Money Morning's options trading specialist, Tom Gentile, says there is even a better play. In fact, of the stocks with the highest potential right now, none of them make vaccines, or therapeutics, or healthcare of any kind.

You see, the pandemic crushed industries that relied on people showing up in groups. These were companies that had their businesses partially or fully shut down as governments instituted lockdown and distancing orders. And they are going to bounce the highest and the fastest once a vaccine arrives.

Since we don't know the exact date a vaccine will be widely distributed, there will be some turbulence in the meantime.

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As we know, however, the "widely distributed" part of the equation is going to take time. Once vaccines are approved, they must be manufactured and distributed. While these are already in the planning stages, with over 300 million people in this country, it will take time to accomplish.

That's why using options trades can give you the upside with the smallest amount of risk.

Instead of holding these stocks in your portfolio and hanging on tight for the ride, you can buy a call option that gives you an amplified upside, and all you risk is the premium to pay for the options. You aren't stuck holding the stock if a vaccine takes longer to roll out than expected or if something happens to the company before the vaccine is ready.

It is critically important to know which companies will survive and then lead the return to the normalcy that a widely distributed, effective vaccine will provide.

And Tom's research has uncovered four stocks ripe for a call options trade right now...

The Best Call Options to Buy Right Now

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Here are Tom's favorite stocks that should rise from the ashes of the pandemic:

  • Cruise line giant Carnival Corp. (NYSE: CCL).
  • Real estate investment trust (REIT) SL Green Realty Corp. (NYSE: SLG), which is focused on acquiring and managing Manhattan-based commercial properties.
  • Transportation fuel and petrochemical company Valero Energy Corp. (NYSE: VLO).
  • Lodging real estate investment trust (REIT) Host Hotels & Resorts Inc. (NASDAQ: HST).

You could just buy the stock of any one or all of them and wait, but Tom has a better way to lower risk and pump up returns. Since it will take many months for the full vaccine rollout, he is looking at a target date of January 2022. That means instead of buying short-term options, we are going to buy LEAPS - long-term equity anticipation securities - which are essentially long-term options.

And like options, the up-front cost is much lower than buying the equivalent amount of stock, so you risk less money at the start.

Let's take a look at SL Green, as an example. Right now, people seem to be fleeing the big cities and New York in particular. At the beginning of the pandemic, it was one of the hottest hot spots for the virus. Restaurants and theaters were shut down, and businesses sent their employees to work at home. Tourism collapsed.

Young workers left their apartments to live with their parents in the suburbs. And the wealthy fled to their second homes far away from downtown.

The thing is that New York is still a global center for everything. When Broadway, museums, restaurants, and other culture reopens, people are going to come back. Even businesses realize that there is a certain advantage to being together in an office and near their clients.

It may not all look the way it did before, but the jump in SL Green stock on the vaccine news tells us the Big Apple will come back, just in a modified form.

Buying a January 2022 LEAPS call will let you profit from the rebound without tying up lots of your capital, and without the pressures of needing the trade to work quickly, as with regular options.

Even if the stock only climbs back to where it was as the pandemic hit - $95 per share - it would still be a 67% return for shareholders. LEAPS will magnify that return to something really eye-popping.

If you buy the January 2022 call with a strike price of $75, which trades for about $5.20 right now, you'd make over 300% gains if the stock returns to its $95 level by August 2021.

That contract will run you around $520 today, substantially less than it would cost to own 100 shares of SLG outright. That would cost about $6,000.

As you can see, options dramatically lower your risk while maximizing your upside.

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