Bonus Options Trade — 1 Trade to Profit From the Choppy Market

The volatile stock market is scaring a lot of investors.

But not us. It’s a treasure trove of opportunities for short-term traders. In Quick Hit Profits we’ve grabbed gains every week in March. And with no shortage of volatility, I expect more chances to grab gains.

I’m coming to you with an opportunity you need to keep on your radar.

The stock is Cryoport Inc. (Nasdaq: CYRX), a logistics company for biotech and temperature-controlled items.

Shares were pummeled by the market sell-off.

And that opens an opportunity for us to profit.

Because it was a high-flying stock, its price has formed a unique formation that tells us what we can expect next.

Here’s what that means for the share price over the next three months.

Descending Triangle Points to 45% Move

The horizontal support level, in green, and falling resistance level, in red, create a descending triangle pattern.

With all of the bearish sentiment in stocks right now, I don’t believe this is a stock that will break out to the upside.

Instead, I see the U.S. coming under an even greater lockdown and almost everything, including experimental biotech companies not working on a coronavirus vaccine, closing up.

That means Cryoport will be losing a ton of revenue that’s not priced in yet.

Taking the bearish sentiment to mean breakdown below the support level, we are looking at a 45% decline in the stock over the next few months.

I get that price target by using the descending triangle pattern.

The expected move after the breakout tends to run the amount of the height of the pattern. In this case, it’s $12 a share. With the stock trading around $13, that would mean a $1 stock.

I don’t see it falling that far. But we can assume a roughly half move to roughly $5 per share.

That implies a 45% price move to the downside and gives us an $8 price target.

Your Trade Setup

To benefit from this expected move, you can buy a put option. The value of the option should rise as the stock declines.

Since the expected move is three months, we can use the August 21, 2020, expiration date to take advantage of it.

With the stock trading around $15, we can buy the $12.50 strike price for roughly $2.

That puts us in a position to double our money as the stock price moves toward $8 a share over the next few months.

Since this is a bonus opportunity, we won’t be updating you on what action to take next. A good rule of thumb is to set a limit order to sell half at whatever would net you a 50% gain. And you can look to preserve capital if it falls below a 50% loss.

Here’s a table with the trade setup:

Since this is our first bonus options trade, we’d love to hear what you think. Just send us an email at winninginvestor@banyanhill.com and let us know what you think!

Regards,

Chad Shoop, CMT

Editor, Quick Hit Profits

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