How I’m Trading XRT This Coming Week

Like just about everything else this year, Black Friday, today, is shaping up to look mighty different. Lots of retailers are coming forward to announce their annual "game plan," but some outfits just plain didn't open up on Thanksgiving yesterday.

Plenty of retailers - Walmart, Target, Best Buy, Dick's Sporting Goods, Bed Bath & Beyond - jump to mind.

Now, some companies said they did it for safety reasons; the coronavirus pandemic is as bad as it's ever been in many places, making packed aisles a dicey proposition. Other retailers say they did it to reward employees that have had to go "above and beyond" over the past year.

The "traditional" ways traders have cashed in on Black Friday in the past aren't necessarily going to work here in 2020.

Here's what to do...

The Usual Tricks Won't Work This Year

In a normal year, (i.e., any other year but 2020) traders could count on a nice revenue spike to trade in the short term; you could pretty much pick any national retailer, buy some calls or bull spreads, sit back, and wait for your ship to come in.

This year, I'm betting that won't be the case. I don't think we should save the leftovers until that short, sharp, tradeable "bump" arrives, if you catch my drift. That's not to say it's not possible to learn how to leverage small, explosive stocks to potentially grow 546% richer, though.

However you come down, personally, on the issue of working retail over Thanksgiving Day, if the store didn't open Thanksgiving Day, they're out that revenue. It's really that simple.

It's dawn on Black Friday right now, but I think the entire Black Friday "season" is going to be more of a drawn-out affair as far as numbers are concerned.

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It's very possible the numbers will be weaker, overall.

I'm seeing surveys that indicate the majority of shoppers will not be busting down the doors today, but that they'll take advantage of either online shopping at some point between now and the holidays, or they'll opt for curbside pickup where it's available. That's going to spread the money out.

There's a spoiler, though.

Big national retailers like Walmart Inc. (NYSE: WMT) and Best Buy Co. (NYSE: BBY) are actually trading at all-time highs right now. The closure announcements haven't hit the stocks at all.

I think that's going to change in a big way; I don't believe this upward momentum is sustainable, and it's going to stall out - any day now.

But there's still an inexpensive, low-risk way to profit... We'll just do it a little differently this year (go figure).

What I suggest today, when the market reopens after the holiday, are bearish put spreads on the SPDR S&P 500 Retail ETF (NYSEArca: XRT).

Here's one that looks good right now: Buy a long XRT Jan. 15, 2021 $58 put and sell a short XRT Jan. 15, 2021 $54 put for a $1 debit (or $100 for 100 contracts). This move means you're risking $100 for a shot at $400 when retail likely turns out to be a disappointment this season.

And when you're done putting that order in, go and check out some of my latest research on what I'm calling a "retirement income hack."

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Andrew Keene

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Andrew Keene is a globally known trader and a renowned expert on all things options.

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