How We Banked Two Wins From a Single Stock

Today, I want to show how we pulled off two winning trades on a single stock among all the market carnage… [Jeff Clark's Market Minute]( Managing Editor’s Note: Today, we’re handing the reins over to colleague Larry Benedict – a market wizard and legendary hedge fund manager. Today, he’ll tell you about how he captured a great reversion-to-the-mean trade for his readers. Here’s Larry… --------------------------------------------------------------- How We Banked Two Wins From a Single Stock By Larry Benedict, editor, Trading With Larry Benedict Even before the rout on August 5, a huge money flow was already underway… The major indexes (including the Nasdaq and S&P 500) topped out in July. Investors were dumping stocks as a major pullback took hold. By the time both bottomed out on August 5, they’d lost almost 16% and 10%, respectively. Throughout that flight to safety, a big chunk of that money found its way into bonds. Weakening economic data exacerbated that move. (Note that bonds increase in value as the likelihood of rate cuts intensifies.) But like any switch in money flow, that move can become overdone… And that’s what we saw with bonds. By August 2, the iShares 20+ Year Treasury Bond ETF (TLT) was trading in overbought territory. It looked vulnerable to a fall. Not only did we get that call right and prosper from a down move… we also caught the next move when TLT bounced. Today, I want to show how we pulled off two winning trades on a single stock among all the market carnage… Recommended Link [Warren Buffett, Jeff Bezos, Michael Bloomberg, & 48 Members of Congress Are Buying ONE Sector…]( [image]( Why are Warren Buffett, Jeff Bezos, Michael Bloomberg, “The Walmart Family”, Bill Gates, and 48 members of Congress shifting their stocks in a frenzy? [And why are they all piling into ONE unique corner of the market…]( This corner of the market is NOT artificial intelligence… Crypto… gold… energy… bonds… dividends… options strategies… or any other familiar sector or strategy.  Instead… - [It’s a sector that the U.S. Gov’t spends 6-TIMES more on, than our own ENTIRE military defense budget.]( - It’s a sector that is expected to grow another $10 trillion… - And save an estimated 14 million lives per year, in the process. The last time we saw the world’s wealthiest investors move their cash into this corner of the market… Stocks exploded 2,020%… 5,609%… Even as high as 8,437% in just ONE year. Now, it’s all happening again. [Click here for the details.]( -- Capturing a Fall In the chart of TLT below, you can see its sharp rally from mid-July. TLT leaped above its 50-day moving average (MA, blue line). That move coincided with momentum turning higher as well (green circle), as shown by the Relative Strength Index (RSI). iShares 20+ Year Treasury Bond ETF (TLT) Source: eSignal [(Click here to expand image)]( But that surge in buying soon put the RSI into overbought territory (upper gray dashed line). And that move looked overdone. That’s the type of scenario I look for to capture a mean-reversion trade. I aim to profit when an overstretched price snaps back the other way. So on August 2, we bought a put option on TLT. A put option increases in value when the underlying stock falls. Although we were a little early with the trade, it proved to be the right call… After peaking on August 5, the RSI formed an inverse “V” at “A” and retraced from overbought territory. As the chart shows, TLT declined as momentum steadily fell. Our position was in good profit, and TLT’s down move stalled that day. So we exited our position by selling our put option on August 7. That enabled subscribers of my option advisory The Opportunistic Trader to generate a 34.5% gain. That’s a handy profit in just five days. But with that reversal to the downside looking overdone, we next decided to set ourselves up for a bounce. We just needed to wait for the right setup… Trading Both Directions That setup appeared the following day when the RSI reversed at “B.” The move coincided with TLT trading around $95. That was a key support level from which I believed the stock would rally. Take another look: iShares 20+ Year Treasury Bond ETF (TLT) Source: eSignal [(Click here to expand image)]( In anticipation of a rally, we bought a call option on TLT on August 8. A call option goes up in value when the underlying stock increases. And again we made the right call… TLT gapped higher the following day but then reversed off its highs. So we played it safe and closed out our TLT position by selling our call option. That netted those subscribers who placed the trade a 15% gain in a single day. Altogether, traders who took part in both positions generated a combined 49.5% gain in a week. Free Trading Resources Have you checked out Jeff's free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career – at zero cost to you. Just [click here]( to check it out. Now, remember, options magnify both gains and losses. And because options have a finite life, the clock is always ticking down to expiration. So if the move you planned for doesn’t pan out, you can lose all the premium you paid if you hold the option through expiry. But as this trade shows, options are a great tool to profit from sharp reversals. We can generate outsized gains quickly... And among all the market carnage, it enabled us to generate a nearly 50% return in a single week. Happy Trading, Larry Benedict Editor, Trading With Larry Benedict [Jeff Clark's Market Minute]( Jeff Clark Trader 55 NE 5th Avenue, Delray Beach, FL 33483 [www.jeffclarktrader.com]( To ensure our emails continue reaching your inbox, please [add our email address]( to your address book. This editorial email containing advertisements was sent to {EMAIL} because you subscribed to this service. To stop receiving these emails, click [here](. Jeff Clark Trader welcomes your feedback and questions. But please note: The law prohibits us from giving personalized advice. To contact Customer Service, call toll free Domestic/International: 1-800-752-0820, Mon–Fri, 9am–7pm ET, or email us [here](mailto:contactus@jeffclarktrader.com). © 2024 Omnia Research, LLC. All rights reserved. Any reproduction, copying, or redistribution of our content, in whole or in part, is prohibited without written permission from Omnia Research, LLC. [Privacy Policy]( | [Terms of Use](