Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The 10 Best Stocks for Options Trading Plays in This Market

Companies / Options & Warrants Aug 28, 2015 - 01:45 PM GMT

By: ...

Companies

MoneyMorning.com Tom Gentile writes: The biggest market drop in recorded history on Monday… a wild end-of-day plummet on Tuesday… a huge up day on Wednesday… and more bullish action today?

Talk about opportunity!

Right now, the only real barrier to trading profits is a stock that doesn't move.


So in times like this, I like to use a really great tool that identifies what I call my "Top Movers" – the stocks and ETFs that have had the biggest percent moves and best correlation to the market.

Then I can focus on finding the best stock with the best option trade and the best potential to double in value on the smallest move in the stock.

That's a lot of "bests."

This is a really simple tool, and I know you'll like it.

The Second-Biggest Obstacle to Options Profits

When trading options, time decay – the loss of value as expiration approaches – is the biggest obstacle to profits.

But the second-biggest obstacle is a stock that does not move.

You can do all your homework and make all the right moves, pick a solid stock with good fundamentals, even anticipate where the markets are going in the weeks ahead.

But if the underlying stock or ETF doesn't move, your options will simply waste away.

When the stock does not move, day after day, the time decay is even worse. You're not getting any stock price move that is either intrinsic to counter theta decay, or you're not getting any stock price move that gets your options close to "in the money" to get you that intrinsic value increase.

This is why I favor the "in the money" (ITM) options to begin with on my shorter-term directional long call or put option trades.

You can probably see where I'm going with this. The best way to avoid this is to trade calls and puts on stocks that move in price. You can see movement or volatility in price by looking at a chart. If a stock trades sideways in a range for three, six, or more months, that is not a stock to try and trade options on.

That's not to say you should avoid any stock that trades sideways. If that sideways range trades slightly up or down in trend but has a five-point range between support and resistance, then trading options on that stock becomes very lucrative indeed.

I am not a fan of going through all the "optionable" stocks one by one on a charting program. There are over 2,500 optionable stocks, and when you add in ETFs and indices, that number goes way up. Trying to go through them one by one will eventually drive you crazy.

Fortunately, I've developed a great method to whittle it down to the 10 best stocks at any given time.

How I Find My "Top Movers"

I run a scan that searches for what I call my "Top Movers." First, I look for only stocks with options that trade in penny increments, typically within a $0.05 bid/ask spread. That narrows it down to around 250 stocks in total.

You can find that list of stocks, called the "Penny Pilot" list, at the Chicago Board Options Exchange (CBOE) website:

best stocks

Sifting through 250 stock charts looking for volatility is still a lot of work, so to cut that number down even further, I set my search parameters on that list in the following manner:

  1. Stocks over $100 per share
  2. Stocks that move an average of 1% a day between the high and low
  3. Stocks that correlate to the market, specifically the S&P 500, as tracked by the SPDR S&P 500 ETF Trust (NYSE Arca: SPY)

Here is a snapshot of the search results (taken Wednesday afternoon). These are stocks that meet the above criteria and have been on the move over the previous seven days.

best stocks for options

Here's Your Trading Lesson Summary…

The second-biggest obstacle to options profits is a stock that doesn't move. Here's how to find the ones that do:

1. Find stocks with options that trade in penny increments, or with a $0.05 spread between the bid and the ask (usually around 250 of the 2,500 optionable stocks).

2. From there, search for stocks priced over $100 that move an average of 1% a day between the high and low and that correlate with the market. That should leave you with a pretty robust list of quality stocks.

3. Run a "percent to double" search to see if any of the stocks have a short-term ITM option with a chance to double. Then find the option that requires the lowest percentage move in the stock price to double.

IMPORTANT – If markets are wild, option premiums may be much higher… employ the loophole strategy I have discussed before.

4. IMPORTANT – If markets are wild, option premiums may be much higher… employ the loophole strategy I have discussed before.

Usually a few of the top spots will be ETFs, but here we have a solid collection of stocks, including…

  • Celgene Corp. (Nasdaq: CELG),
  • F5 Networks Inc. (Nasdaq: FFIV),
  • Gilead Sciences Inc. (Nasdaq: GILD),
  • UnitedHealth Group Inc. (NYSE: UNH),
  • Amazon.com Inc. (Nasdaq: AMZN),
  • FedEx Corp. (NYSE: FDX),
  • Amgen Inc. (Nasdaq: AMGN),
  • Anthem Inc. (NYSE: ANTM),
  • Apple Inc. (Nasdaq: AAPL), and
  • Baidu Inc. (Nasdaq ADR: BIDU).

The fifth column from the left shows the stocks' percentage move over the last seven days, and the seventh column shows how well the stock correlates to the SPDR S&P 500 ETF Trust, which is what I use to measure the markets over the last 20 days.

With those two numbers, you can figure out how well a stock moves, and if it's moving with or against the markets.

Once you have this list of stocks, you can run any number of screens and filters to assess which of these "Top Movers" would make the best option play.

For example, you can run a "percent to double" search on the stocks and see which one has an option that has the potential to double, then further analyze them to see which one requires the lowest percentage move in the stock price to double.

So from here, I can cross-reference this with my Money Calendar to find the best stock with the best option trade and the best potential to double in value on the smallest move in the stock!

Get Power Profit Trades Updates on These Plays and More

When you're using options, you've got to stay on top of the trade. So Tom is committed to regularly updating his Power Profit Trades readers on the latest high-profit opportunities each week. To get these updates and recommendations yourself, click here. You'll also get his latest investor briefing on how to double your money on Apple Inc.

Source http://moneymorning.com/2015/08/28/the-10-best-stocks-for-options-plays-in-this-market/

Money Morning/The Money Map Report

©2015 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in