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Well, the “buy the dippers” are back in full force after bank earnings and Moderna (MRNA) vaccine news…

And it looks like this momentum can continue.

Of course, there are stocks I want to have a bullish position on, but they may be too rich at these levels.

I mean the dollar value on some of these stocks is insane and the options premiums are juiced.

I’m a firm believer that with all the traders who piled into the market recently, there are some “suckers” placing random bets.

Now, there is a way to take advantage of these “sucker bets” with defined risk…

And I want to show you the strategy I used to lock in $6K on two trades on Tuesday.*

How I “Stole” $6K From The “Suckers” In LULU and MTCH

 

On Tuesday, I noticed there were a lot of opportunities after it made a dip. I figured it was the same story over and over again…

Stocks take a drop and quickly rebound. That’s kind of been the theme over the last few months.

Once I noticed that I figured I would look to establish a bullish opinion on some names I’ve been watching.

However, there was still potential for a further dip. So rather than buying calls or shares outright in these names, I used what is known as a bull put spread.

Why?

Well, with a bull put spread, I’m essentially betting where a stock won’t go.

For example, Lululemon (LULU) was one stock on my radar.

 

Source: StockCharts

 

If you look at the chart above, LULU was in a bull flag pattern on the daily chart, and there were key levels that could act as support.

More specifically, I was looking at the 34-period exponential moving average (EMA) as a key support level. The 34 EMA has held before, and I figured it would hold again.

Now, there were two ways to play this…

I could’ve sold the $295 puts, while simultaneously purchasing the $290 puts.

I could’ve sold the $300 puts, while simultaneously purchasing the $295 puts.

I opted for the latter trade.

By establishing that bet, I stacked the odds in my favor, in my opinion. You see, LULU could’ve dropped a little, or even stayed sideways, I was in a position to profit. If the stock popped, I would capitalize on the drop in the put premium.

Why did I opt for the $300 / $295 put spread?

I had a high conviction and wanted to get aggressive.

Well, that bet paid off… and I was able to lock in a 32% winner, or about $4,500 in realized gains in a matter of hours.

 

 

I also followed a similar approach with Match Group Inc. (MTCH).

 

Source: StockCharts

 

The 34 EMA has held as a support level for MTCH multiple times over the last few months, and I figured that area would allow me to establish a bullish opinion.

With MTCH, I sold the $97 / $95 put spread.

Basically, I believed MTCH would stay above $97…

And in just a matter of hours, MTCH caught a pop, and I was able to lock in a 27% winner, or about $1,500 in realized gains.

 

 

Now, if you want to learn more about this risk-defined strategy that allows me to trade high-dollar names without breaking the bank…

Then you’ll want to check out my latest eBook, Wall Street Bookie.

Inside, you’ll find case studies on my number 1 edge in the options market, and the strategy I use to take advantage of the “sucker bets”.

Claim your free copy here.

 

 

*Results presented are not typical and may vary from person to person. Please review our full disclaimer located at ragingbull.com/disclaimer.

Author: Jason Bond

Jason taught himself to trade while working as a full-time gym teacher; his trading profits grew eventually allowed him to free himself of over $250,000 in student loans!

Now a multimillionaire and a highly skilled trader and trading coach, Over 30,000 people credit Jason with teaching them how to trade and find profitable trades. Jason specializes in both swing trades and in selling options using spread trades, which balance the risk of selling options. Jason is Co-Founder of RagingBull.com and the RagingBull.com Foundation which donates trading profits to charity. So far the foundation donated over $600,000 to charity.

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