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We're clearly nearing the end of the pandemic, at least as far as its impact on our normal lives goes, and not a minute too soon. Vaccines and herd immunity are all over the headlines, and folks like Dr. Fauci and President Biden have both said, cautiously, if things keep improving, we could see something like normal life returning by this summer.
The economy is rebounding, and some corners of the market have already fully recovered. Walt Disney Co. (NYSE: DIS) just blew past an all-time high of $193.85 thanks to a $16.25 billion earnings beat on Feb. 11.
Expectations there had been pretty modest, considering how hard the pandemic has hit Disney's bottom line, but the performance knocked the markets' socks off.
The takeaway there is that Disney is coming back stronger than ever. That's what pent-up demand can do to stocks.
The Disney "pop" has already happened, but my proprietary Money Calendar has found what I think should be an even better play on a pandemic rebound.
Best of all, we can do it for basically pennies on the dollar and book double-digit profits – or maybe even better. Here's how…
There's Big Long-Term Potential Here
"New normal" is a phrase we've heard a lot over the past 12 months, but I think recovery is about to become the "new normal." It's a trend I think we've all been looking forward to.
That recovery's going to have a huge impact almost all the way across the board, including sectors that have already started to rebound.
100% SUCCESS RATE: This strategy helped Tom put together his best year ever, with 23 wins and zero losses since April 2020. See what's next here…
But I think the recovery play to make is the cruise lines. I know: For months, folks have been saying "hold off on cruise lines," and that's been true, but now's the time.
Top cruise stocks like Royal Caribbean Cruises Ltd. (NYSE: RCL) and Carnival Corp. (NYSE: CCL) are trading around 50% below their pre-COVID-19 levels.
So it's almost all upside from here.
Pre-pandemic, Royal Caribbean was the revenue superstar of the cruise segment; it took in revenue of $5.6 billion, and RCL shares were trading at an all-time high of $135.
Royal Caribbean has already booked 150,000 people for test sailings, and once it's given the green light (and I think it will be), we're talking "skyrocket" territory.
You can see the price slowly rebounding in the chart above…
But it has yet to hit the real spike I'm looking for – that's the one we're going to profit on.
Let's Look and LEAP on Royal Caribbean
Sure, you could buy Royal Caribbean, but it's $87 a pop right now – $8,700 for 100 shares. If it even comes close to its former highs, we're talking about a gain of around 55% or so, which isn't bad.
The lower-risk, higher–potential return play is long-term equity anticipation (LEAP) options, where you could make that kind of profit with a much smaller move in the stock.
One of the great things about options is you can use them to take down profits in three or four days, but you can also use them to cash in on moves – like a powerful rebound coming to the cruise industry, say – even if you think the big move is happening a few weeks or months down the line.
Right now, you can buy RCL Jan. 21, 2022 $80 calls, 100 contracts for $1,700 – seventeen hundred bucks to control 100 shares of Royal Caribbean for a year, versus $8,700 to buy outright.
That's smart, but there's an even sweeter spot to be in. You can lower your risk even more by building an RCL call spread, selling a higher–strike option while buying a lower–strike option to slash your risk to the bare minimum.
To do it, buy an out-of-the-money (OTM) call expiring in early 2022, while selling a call, one or two strikes higher, expiring on the same date.
WORST CASE: You could own one of the best stocks available, maybe at a deep discount. Best case? With the right stakes, you could potentially add thousands of dollars to an account on a near-weekly basis. You've got to see this…
Right now, you can buy an RCL Jan. 21, 2022 $80 call and sell a Jan. 21, 2022 $90 call for about $3.25 a share. You're risking just $325 for 100 shares of RCL worth $8,700.
Spreads can be a great way to bag cheap and big profits on trends that are just starting to pick up steam – and with LEAPs, you can give yourself a really, really high ceiling – but that's just one strategy. Like I said, the beauty of options is that there are so many ways to potentially profit.
I've been working on what I think is the perfect way for anybody to target blue chips – for a fraction of the cost and risk. The strategy helped achieve my biggest win rate: 100% since April 2020, during one of the most turbulent years in a century. That's 23 wins and zero losses. The market is continuing to turn around, too, so I don't see this profit potential slowing down anytime soon. I'll fill you in on the details here…
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About the Author
Tom Gentile, options trading specialist for Money Map Press, is widely known as America's No. 1 Pattern Trader thanks to his nearly 30 years of experience spotting lucrative patterns in options trading. Tom has taught over 300,000 traders his option trading secrets in a variety of settings, including seminars and workshops. He's also a bestselling author of eight books and training courses.