An Income Trade You Can Make Today

Stock prices are volatile this week. Monday’s big decline was followed by a sharp rally on Tuesday. The reason seems to be the coronavirus.

The problem is that no one really knows much about the virus. It’s a lot like the SARS panic that unfolded in 2003 or the MERS scare that developed in 2012. Both of those were serious, but neither led to the deadly global pandemics that were widely feared.

Coronavirus may be worse than either of those, or it could be contained relatively quickly. One important point is to remember that no one knows, and that’s becoming a significant concern.

Listen To This Advice

An old trader I know once told me, “There are two kinds of traders in the world – those that don’t know and those that don’t know they don’t know, and the second kind is dangerous.”

Okay, so he has actually told me that many times. He would repeat this little pearl of wisdom anytime I got ahead of what I knew and started basing my analysis on opinions rather than facts.

He meant it as a reminder to stick to what I know rather than making assumptions. Right now, many traders are making assumptions on information they don’t know that they don’t know — and that’s creating a dangerous market environment.

Over the years, I’ve worked to be the kind of analyst who remembers that I don’t know everything. My friend enjoyed a successful, 50-year career investing with that philosophy, and I intend to do the same.

Coronavirus is just one example of what we don’t know. Another big one I see on the horizon is a massive misunderstanding of bear markets. Many traders don’t know that they don’t know what a bear market is. When the bear market comes, they will panic, and their actions will create volatility.

But we are in a much better position because, while we still don’t know when the bear market will start or how it will look, the facts tell us that, eventually, a bear market will come. With that knowledge in our pocket, we can prepare by focusing on protecting capital. Sticking with short-term trades in low-risk options is a great way to do this. It’s a strategy that has been working well for Income Trader readers for years.

A Trade You Can Make Today

This week, we are in the midst of earnings season, and stocks are volatile. That means many options are trading with premiums that fail to fully consider all of the risks. I’m avoiding exposure to stocks as they announce earnings.

This limits the opportunities that are available. But I found a low-risk put-selling opportunity in waste-management firm Clean Harbors (NYSE: CLH), which won’t report earnings until later in the season.

This trade was identified by my award-winning Income Trader Volatility (ITV) indicator. It is not an official Income Trader recommendation, and I will not include my usual full, detailed analysis. That’s reserved for my premium readers only. That said, if you’re familiar with how put options work, then this is a trade you can place today. (Of course, prices can and do change frequently. So do your own research before making the trade.)

I’ve included the specific option, as well as some additional information in the table below.

This Week’s Top Candidates (Sell To Open)
Option &
Expiration Date
Bid/Ask Mid 20% Margin Return (Margin) Ann. Return Probability Expire Worthless Earnings Date
Sell CLH Feb 80 Puts
February 21, 2020
$0.45 $1,600 2.8% 42.8% 84% Feb. 26

(I always recommend the use of limit orders when entering an option trade. A limit at the midpoint between the bid and ask prices will often be filled fairly quickly.)

Now, take note of the chart below. In the upper section of each chart, you can see the stock’s weekly price movement. In the bottom section, you’ll see the stock’s ITV (grey solid line) and the ITV’s 20-week moving average (green dashed line). These charts usually show several previous signals and could help you evaluate how successful signals were in the past.

If you’ve never used options before, you might be a little worried about trying. I understand why, but after helping thousands of folks use them—people who are probably a lot like you—I can say that they’re not nearly as difficult or risky as you might think.

Most of my new subscribers had never traded options this way before… and they are now making thousands… even tens of thousands of dollars in extra income. Every month.

Since we launched Income Trader in 2013, we’ve closed 219 trades… and we made money on 199 of them. That’s a 90.9% win rate. Readers who followed my weekly trades and sold 10 contracts each time have collected nearly $2,500 every month. If you’d like to be one of them, simply go here now.