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Last month, Money Morning Quantitative Specialist Chris Johnson showed his readers a trade in a telecom about to take full advantage of the 5G revolution.
It looks even better now, and he doesn't want you to miss out. That's why it's our best options trade on February earnings reports.
With earnings expected to be released in less than two weeks, Chris thinks that this stock will be cleared for a rally lasting for months, with an upside potential of 25%. But with the right options strategy, we can increase potential profits while limiting overall risk.
This company provides telecommunications solutions to a variety of network providers, from 5G connectivity to fiber optics and cloud computing. If you think the world of work will be forever changed as more people work from home, then this is one of the companies that will make that possible.
Not only that, but as more of our lives happen remotely, from controlling a smart home to making sure power delivery and transportation routing is as efficient as possible, we need reliable solutions that are fast. This does not mean "a quick download of a movie" fast, but rather real-time control of things happening a long distance away. Any time delays between remote commands and, say, a robot performing surgery are absolutely unacceptable. That is why 5G is so critical.
The 5G, or fifth generation, communication network promises expanded bandwidth, faster upload and download times, and near–immediate control for all types of remote needs, including autonomous cars, drones, and even traffic control.
The company at the center of our trade isn't just a leader in 5G; it's actually going far beyond it.
That's making it one of the hottest stocks to trade today.
And with Chris's options strategy, you can turn a 25% jump in share price into a 50% gain with a fraction of the upfront cost…
The Best Options Trade for Earnings Season
Infinera Corp. (NASDAQ: INFN) is in hot demand.
Infinera is currently one of three providers in the world of 800G solutions, a tech feat that could even blow 5G out of the water.
But let's not get too far ahead of ourselves. The 5G rollout is still in progress.
Last month, Chris recommended buying shares of INFN with a limit price of $10.50. Usually we don't get second chances to buy, but with the broad market pullback late in January, we're getting a second chance. It has had a strong week but is still below Chris's limit price. The difference is that the technicals have improved, as both the 20- and 50-day moving averages have turned higher. That means the trend in the stock is tested and ready to resume its upward march.
Chris also offered an options trade to leverage the stock's move, and because we are looking at it a month later, it is still at an attractive level. Remember, options prices tend to drop over time, even if the underlying stock price edges up a bit.
So, Chris still recommends the INFN July 16, 2021 $10 calls (INFN210716C00010000) using a limit order of $2.50.
If the stock moves 25% higher by the end of April, the options contract could be worth 50% more.
That's just one advantage of using options. You see, the options contract controls 100 shares of the stock. It's trading around $235 a contract right now. If you purchased 100 shares of the stock, it would cost you $1,042.
Right away, options lower your risk since you have less money at stake. Plus, the gains are amplified. If the stock jumps to $12.75 a share, a 25% climb, your shares would be worth $1,275, a 25% profit. But the options contract is expected to be worth $350 if the share price hits $12.75 on April 23, a 50% profit.
That's a win-win for options traders. Of course, there is still risk. If the trade goes against you, then you could lose what you paid for the contracts when they expire. Owning the stock outright has the advantage of letting you hold for as long as you want and recouping some of your investment back.
But for traders looking to profit from quick swings in stock prices, options are a powerful tool to do just that.
And if you want even more expert help on options strategies, don't miss this…
Millennial Millionaire's One-of-a-Kind Trading System
It's been generating money hand over fist since the recession of 2008… and now, he's finally sharing the secret!
Investors in today's economic climate need every advantage they can get, and I don't think I've ever seen a strategy more powerful than this.
Click here for the full story and the next three plays he has his eye on.