Start the conversation
Wall Street players always seem to know what's coming just around the corner. They have a funny way of "being there" just ahead of the big news.
Whether it's a massive deal or a market-rocking IPO, they somehow always manage to be first in line for the profits.
A lot of investors are resigned to it. "It's just the way the world works," they'd say.
But what if I told you that I've got 'em dead to rights? I know their next move, and – even better – I can help put you in position for profits normally reserved for the "first in line" Wall Street elite.
Now that I've got your attention, here's what's happening…
This Only Happens Once a Year
Let me tell you about something I like to call "the only free lunch on Wall Street." Like I said, these big players don't offer folks a chance at easy money every day; they'd much rather keep it for themselves.
But once a year, Uncle Sam forces their hand.
See, around this time of year, investors large and small tend to trim their portfolio down, getting rid of losers near year-end for tax purposes. For whatever reason, they don't want to stick around for the last few dollars or cents in a trade. They may have already made decent profits on the position.
But when huge institutions dump positions like this, it can absolutely hammer the stocks they're selling – sometimes to the point where these companies turn into the market's biggest losers.
INCOME HACK: This could be your shot to collect $1,000 to $5,000 a week, regardless of how volatile the markets are. Details…
So why should you care about beaten-down stocks, particularly in such a bullish year? Turns out, there's a good reason…
After spending years researching this "sell-off effect," I noticed the stocks that typically sold off mid-December usually outperform the market in the early months of the following year. I'm talking stocks that were at or near their 52-week lows that climbed steadily over the next two months.
This trend repeats year, after year, after year.
So, I thought to myself, why not pick up Wall Street's "scraps" and score big on these beaten-down names? And that's precisely what I did. You wouldn't believe how surprised I was the first time I cashed in on my "free lunch" from Wall Street. And since then, I've been doing it every year.
Here's a closer look at the criteria I'm looking for…
When it comes to Wall Street's throwaways, I'm looking for five things…
- Stocks that are optionable.
- Stocks with a trading volume greater than 200,000 shares per day.
- Shares currently from 0% to 10% above their 52-week low.
- Option contracts priced above $3.
- Options with an average true range (ATR) of $0.50.
These criteria really help me narrow it down to the best prospects – and I also screen out exchange-traded funds (ETFs). For me, they just don't offer the same profit potential stocks can.
And that's it; I have my list. From there, I'm looking to buy call options that are at least two months out. You see, with this pattern, we typically see the biggest returns from late December to early February.
During this two-month time, we see the stocks that fit these criteria being dumped by Wall Street only to be pumped back up with volume, typically skyrocketing the price. And here's the thing: This "free lunch" happens no matter what the market is doing.
For example, just last year, the bargain stocks saw a 24.9% change from December to February. The NYSE Composite moved up only 15.1%, meaning that this pattern outperformed the market by a whopping 9.8% – a pretty nice return.
And when you look at the overall history, you'll be even more shocked. Over the last 45 years, "bargain stocks" have moved up 549.7% in total, while the NYSE only accounted for a 146.7% uptick.
Quite a jump, right?
And if you're not convinced, here's a simple breakdown of the last 45 years…
So, needless to say, I'm looking forward to seeing how this pattern performs after such a volatile year. And I've already got my sights set on eight stocks that I think will fit exactly what we're looking for. And on Friday, I'll be revealing my "bargain stock" list to every single member of my 1450 Club.
And the best part is that you still have time to grab your seat at the table for this free lunch event. I'm extending an exclusive invitation to Money Morning Members right now. But you better hurry because the guest list is filling up fast, and I would hate you to miss it.
I'll see you Friday.
About the Author
Andrew Keene, editor of the 1450 Club, Super Options, and Project 303 at Money Map Press, is a globally known trader and a renowned expert on all things options.