Best Buy recently announced that we should expect them to make less money in 2011 than they had previously stated. The stock has gapped down and continues to fall from $42 the night before earnings to just $34.05 at the close today.
What if you believed that it has fallen a bit too much and should recover given some time? After all, we saw a similar drop in the summer when the stock fell from $48 to $31 and that one was also caused by fundamental concerns about their business moving forward. BBY made a nice recovery to $45 given some time. I feel that BBY could go up again but I also know I could be deadly wrong, especially if our over bought markets cool off a bit. I find that using options strategies like covered calls and collar trade can help solve the problem of overly relying on my expectations of future BBY stock price.
For most people, pulling the trigger to buy a stock or do an option trade can be a nerve-wrecking experience. Doubt plagues all of us. I am sure that BBY could drop more from here, at least to the 52-week low of $31 per share. So why would I hurry up and buy a falling stock? Because it does not matter whether BBY goes up, stays here or even drops from here…I can make some money.
Put yourself in my shoes. If you know that you will likely make money even if BBY falls 10% or 15% or more, would you still hesitate to pull the trigger? If you have a written plan on what to do if BBY falls more and you know that plan works, your trading life can become much simpler. This is what a good options education can do for you.
OptionsAnimal students are watching real money live trades, day-by-day like this one on BBY. This gives our students a clear edge over just learning some theory. We don’t just teach what to do when a trade does not work, we show live how we are fixing our bad trades (let’s face it, we all have them).
I have used this process to make money in 2010 on bad stock picks like RIMM, BBY and MON to name a few. All three stocks fell more than 20% after I bought them but they all made me money. Falling stocks or other options trade gone awry don’t have to wipe out all the good trades you do. Take a closer look at what we do and how it can benefit your trading….call us today at 888-297-9165.
Charan Singh
OptionsANIMAL Instructor
Options Trading Resources
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