Friday, May 13, 2022

♟The Perfect Bear Market Trade?

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"Covered call trades can be confusing for some people because they think only about the stock going up. Yet they can also make money when the stock goes down."

Karim Rahemtulla, Head Fundamental Tactician, Monument Traders Alliance

Karim Rahemtulla

I want to introduce you to a strategy that I love.

It's called "in-the-money covered call writing."

This strategy is powerful because it gives us three chances to make money.

That's right, three!

First, we can make money if the stock goes up...

Second, we can make money if the stock stays where it is...

And third, we can make money if the stock does not go down more than a certain percentage - usually 20% to 40%.

That's a lot of profit possibilities.

Here's how it works...

Instead of selling calls above a stock's share price, we sell them BELOW the share price and let time do the work for us.

3 "Big Money" Things in 7 Minutes (Can Transform Your Trading!)

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You'll discover the three "big money" things that can help transform your trading.

  1. How regular folks just got the chance at 19 wins in 23 trades.
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How to execute a covered call trade...

  1. Pick out your net debit price - the net amount you want to pay for the stock.

  2. Buy to open (opening trade) the stock. Or sell to open (opening trade) the option.

  3. Enter your net debit price.

  4. Sit back and enjoy if it is deep in the money (strike price well below the current share price) or sit back and feel a little nervous if the strike price is above the current share price.

  5. At expiration, if the share price is above your cost, you win. If it's below your cost, you lose.

  6. If the share price is above the strike price, your shares get called away automatically. If not, you can either sell the shares or sell more calls to reduce your cost further.

This strategy for call trades sounds confusing at first since most people focus only on making money from a stock going higher.

But, as this bear market has shown us, stocks go down as well. So it's good to have this strategy in your back pocket.

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YOUR ACTION PLAN

Today, we executed a covered call trade in The War Room, targeting 22% upside with a 40% downside cushion. So we are planning to make 22% on this trade with a 40% cushion to the downside. I will take those odds any day!

Safe, disciplined trades like these are the reason War Room members are having an amazing trading week. In the last five days alone, we've closed 15 winners out of 16 trades for a 94% win rate - despite a brutal market. Click here to unlock those trades.

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FUN FACT FRIDAY

Chart - Global Equity Valuations
 

The recent sell-off has been brutal for all markets. However, sell-offs always bring bargain-bin opportunities. As you can see, U.S. stocks remain overpriced compared with those in other markets. That is why we've found a non-U.S. stock (which you can buy on U.S. markets) that we've dubbed The Last Great Value Stock. It currently trades for under $2, and it's your best shot at finding value in the discounted foreign markets. Click here to unlock this trade!

 

INSIGHTS YOU MAY HAVE MISSED

Stock Sell Off Hero Image

Is the Sell-Off Over?

Stick With This Power Play

Buying in the Face of Fear

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Can Options Be as Safe as Bonds?

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This Trade Just Keeps Winning

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