When a trade works well, you make money. When a trade works perfectly, you make money and you share your tactics with others…
This week, in my Income Masters Trading Program, we made the perfect trade.
Expedia (EXPE) announced earnings this past week and blew through estimates.
Our trades begin with companies and stocks, and end with charts—a different approach from almost all other short-term traders. This approach has worked quarter after quarter in Income Masters and my Six-Figure Portfolio Coaching Program, and would have worked even if Expedia had missed earnings.
Here’s a little background…
- Wall Street doesn’t understand the company. When the Street worries about travel, they worry about only a component of travel. They forget that Expedia serves the entire travel segment. When people forego airplanes they don’t forego hotels—they just drive to them.
- The stock bounces up or down 10% around earnings if they surprise in either direction. This pattern has been repeated across several quarters.
- Expedia is quite volatile. The stock has traded from $88 to $140 in the past year. This, in turn, produces option chains, premiums and charts that are wonderful for the option seller. Yes, the seller.
It’s the perfect setup for the perfect trade…
On April 20 in Income Masters, we bought EXPE shares at $108.54 and sold the April, Week Five 100 call for $10.70. Repeat, we sold the deep 100 call.
The premium from this call did two things:
- It reduced our cost basis to $97.74. That was roughly 10% lower than the current share price.
- That premium also held the promise of a great short-term profit if we were assigned or called out of the shares at $100. With a cost basis of $97.74, we would enjoy a profit of $2.26 per share in less than two weeks if called out.
Seems small change? That’s an absolute return of 2.08%—or an annualized return, if we made this trade 26 times per year, of 54.14%. Not small change.
Bottom line: By selling that deep-in-the-money call, we created 10% downside protection while locking in a very tidy profit if we were called out…
In other words, the perfect trade.
The bad news is, the Income Masters Trading Program is currently closed to new members.
Good news is, you can get your hands on my Covered Call Blueprint Strategy that income investors like you use to collect an AVERAGE of $708 per WEEK…