Best Call Option to Buy for a Tidy 80% Gain

Traders have been zeroing in on the stocks hit hardest by the coronavirus pandemic and breakout candidates once the virus is contained. Options traders have been buying calls on stocks in travel and entertainment all year, waiting to scoop up their potentially explosive upsides.

But you won't find the best call options on these popular bounce-back stocks.

Instead, we'll show you how to comb through the rubble and find stocks with not just a real chance to break out once the vaccine is fully rolled out, but that are flying under the radar. These are the real best call options to buy now.

Although there have been some major setbacks in the recovery from the pandemic, such as a slow vaccine rollout and a new, more contagious strain of the virus, it is hard to believe the economy will not get back on its feet. Too many people want to get back to work and back out into the world if only they were allowed to do so.

That's why we have to listen to the market's message. And the message it's sending is new all-time highs. That's only going to keep going as the economy roars back to life.

While you can buy stocks that are trending higher to get a slice of the gains, options give you much higher returns with a fraction of the price of buying stocks outright. For a small amount of up-front cost, you can ride the gains of a more expensive stock, and that means it is entirely possible to see 100% or more gains in a short period of time.

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Still, with most indexes at record highs, there is a good percentage of stocks that are still languishing and maybe not good plays right now. Whether they were directly affected by the lockdowns, such as movie theaters and restaurants, or indirectly affected, like airlines and office REITs, not all stocks are going to bounce back.

Badly managed companies may be permanently damaged and may not survive. Some industries may not recover right away, even with a successful vaccine. Air travel isn't expected to fully recover until 2024.

On the other side of the coin, the obvious candidates for recovery have already done so. Live Nation (NYSE: LYV), the concert promoter, is trading for more than it was before the pandemic started. Call options on this stock will cost you an arm and a leg too.

That's why we're looking for companies that we know have a great chance to bounce back and aren't already on everyone's radars.

This gives us the chance to trade options for cheaper and see higher upsides when the stock comes back to life.

Money Morning Quantitative Specialist Chris Johnson has a lesser-known stock that he thinks is due for a big bounce higher fairly soon.

You see, it's in the travel industry but it's not an airline or a hotel. In fact, it is a technology company.

He is talking about Sabre Corp. (NASDAQ: SABR), which owns and operates the largest air booking distribution network. It is essentially the hub for information and bookings for the entire travel industry.

While notoriously low-margin airlines will struggle to get back on their feet, people will still be traveling. A pick-and-shovel play like Sabre lets you profit on the whole industry's recovery.

On the charts, a move above $12.50 is likely to send it to $15 per share (the stock closed at $12.20 on Tuesday).

But we can do even better by trading a call option on the stock...

The Best Call Options to Buy Now

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There are dozens of ways to profit from a breakout in Sabre, but we can stick to the easiest - buying a simple call option.

We typically recommend options with strike prices at the money or just out of the money. That means the strike (or exercise price) is just above where the underlying stock is trading right now. In this case, it would be a strike price of $12 or $13.

We also like to look about three or four months out. That means an expiration date in April.

So, one possible choice would be the SABR April 16, 2021 $13 call. Its last price on Wednesday was $1.34, or $134 per options contract controlling 100 shares of Sabre stock.

At expiration, if the stock makes it to the $15 price target, the gain would be about 23%. But if the stock hits that price target by the end of February, the option would be worth 80% more.

If you think that is not a reasonable target, consider this. Sabre stock is still down 43% from the $22 per share it was trading before the pandemic bear market hit. That is a lot of recovery room.

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