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Credit Suisse recently released a report stating that over 8,600 bricks-and-mortar stores could close their doors by the end of this year. That's 2,437 more closures than in 2008 – at the onset of the Great Recession.
So it's not surprising to hear so many of the pundits telling investors to dump their retail stocks.
What is surprising – and disturbing – is that they're not telling you about profits you could make in the short term.
In fact, there's an easy, low-risk way to play even the worst of the retail stores…
It's Not Too Late to Turn a Profit on Bricks-and-Mortar Stores
A few months ago, we talked about the sad state of affairs for retailers, and I showed you a probably all-too-familiar picture of the local Macy's store my wife and I passed through:
Now, I wasn't excited then about retailers as an investment opportunity, and I'm even less inclined to consider them viable entities now. As you well know, anchor stores like Macy's are the defining characteristics of malls and are vital in pulling in the bulk of customers. These stores provide what I call the "sideline stores" with foot traffic they wouldn't otherwise get.
An example of a sideline store is Bebe Stores Inc. (Nasdaq: BEBE). Bebe used to be one of the top brand-name clothing stores out there and made a billionaire out of founder Manny Mashouf back in 2006. But now, every single store will be closing this year – and soon. In fact, I asked a store manager when I was in the mall when they'll be officially shutting down, and the answer was "a week or two after the last truck is loaded up and leaves."
Another one is Radio Shack, which already filed for Chapter 11 bankruptcy in 2015 and then again in March this year, with plans to close 365 stores by the end of the year.
So when you look at the fact that the big anchor stores, like Macy's Inc. (NYSE: M), Sears Holding Corp. (Nasdaq: SHLD), and Kohl's Corp. (NYSE: KSS), are shutting their doors, it may seem as though the smartest thing you can do for your portfolio is to walk away. Just look at their stocks…
But that's not quite true…
Here's How You Make Triple-Digit Gains Over and Over Again on the Worst-Performing Stocks
There are two specific ways you can use options to capture profits on retail stocks over and over again – no matter how bad the crisis gets.
1. Long Puts
This is when you buy a put option on a stock instead of buying the stock outright – like renting the stock instead of owning it. When you buy a put, you are taking a bearish position on the stock, meaning you're expecting the stock price to fall.
Puts are among the easiest of options to trade and are a low-cost, low-risk way to …
About the Author
Tom Gentile is one of the world's foremost authorities on stock, futures and options trading.
With more than 25 years' experience trading stocks, futures, and options, Tom's style of trading systems and strategies are designed to help individual investors propel themselves past 99 percent of the trading crowd.