Advisory Board Member Tom Gentile is an expert at making money on cannabis stocks, no matter what direction the market is heading…
When it comes to cannabis stocks…
Now, don’t start sending hate mail my way just because I think it’s time for a break in the cannabis markets.
I am a long-term bull, but there are times that I believe taking profits off the table can create short-term opportunities for those who know where to look.
And that’s exactly what I intend on doing today.
A lot of the pundits say that cannabis stocks are overdone, like an overcooked steak left on the grill.
Now, it’s true that cannabis stocks have been battered around the last few months. And if the financial personalities on TV were wrong all the time, no one would listen to them
But read the statement below:
“Even a broken clock is right twice a day.”
I have a friend who works for Fox Sports South whose job consists of 20-second interviews on the field between innings of a baseball game. When asking him about the job, he says he is a “filler” until he can get the higher-paid, higher-publicity anchor position.
He told me that a “filler” is someone who fills in the time between segments of a news broadcast or, in his case, baseball innings. It’s entertainment, and the position provides some variety for the audience. If he weren’t there doing it, someone else would, just like the analysts that we see on financial networks.
Profiting from the Ups and Downs in Cannabis Stock Prices
I do believe cannabis stocks are oversold, but we have been taking advantage of the downside action at Cannabis Power Trader.
Take a quick look at the technicals of Altria Group Inc. (NYSE: MO).
Since the highs of March, MO has descended in a “lower high” and “lower low” fashion. As the highs are getting lower, the option volatility changed course and has been heading higher, signaling that Altria is out of gas.
Currently, Altria is sitting on yearly lows at $40, right around a support level.
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Now, let me repeat that I am not looking for an all-out drop to the downside. Not at all.
There’s been less news out of Washington about legalization with the next election cycle down the road, but campaign strategies are starting to unfold.
With many politicians changing their stance on cannabis, things will ultimately be better for cannabis stocks.
But this correction in most cannabis stocks – including Altria – has been long coming.
So, how do we make money to the downside?
Shorting Stocks That Are “Overdone”
Shorting is a process where the trader will borrow shares from the firm and sell them to open a bearish position on the open market.
The short seller attempts to make money by buying back the shares at a lower price, thereby realizing a profit (sell high, buy low).
In the chart above, the trader would merely sell MO, expecting the stock to fall.
Then, the trader may use a lower price as a target and purchase the shares back at that price.
If the trader pulls it off, they would see an immediate profit on the lower share prices. Though, this comes with risk, as short selling has unlimited upside risk.
SO, what else could an investor do to take advantage of a potential downside move in Altria?
Buying Puts on MO
Put Options allow the purchaser the right to SELL the security at a pre-determined price, with a pre-determined time to expiration for a premium.
Basically, what this means is that for a small price to purchase the Put, the trade goes in your favor if the stock falls.
Should the stock price move higher, you are limited in how much you can lose.
The graph above shows that on August 21, 2019, we recommended buying the Altria $45 Puts, using the October 18, 2019 expiration.
These puts cost $140 at the time, and since then, Altria has continued to move lower, giving us profits of over $330 (as of September 20, 2019) on a risk of $140, which is better than a 230% return!
While many investors prefer a long-term strategy, they should also consider using Puts to make money in the short term. You can use the profits from Puts to reinvest back into companies you believe in for the long term.
And when folks start to learn about the power of these short-term profit opportunities, what most people do next is check out Cannabis Power Trader.
Opportunity is Now Here!
Cannabis Options Expert, National Institute for Cannabis Investors
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2 responses to “The Short-Term Investing Strategy That Could Lead to Long-Term Gains”
September 30 2019