Risk of about $159 could make this trade appealing to risk averse traders

Three Week Returns of More Than 55% Could Add to This Trade's Appeal ...READ MORE
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Three Week Returns of More Than 55% Could Add to This Trade's Appeal

Bad news can be devastating to investors. In one recent example, a stock dropped enough to wipe out months' worth of gains. In this case, the stock lost so much that any share holder who bought positions since the beginning of the year face losses.

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That can be important because it could add to selling pressure in the stock, potentially accelerating the decline associated with the news.

We identify the stock and, as we explain in our latest article, we review a trading strategy that could benefit from additional weakness in the stock. The strategy focuses on risk and limits the risk to a relatively reasonable amount, in dollar terms.

This is an options strategy that allows a trader to know the risk as they place the trade. Unlike with stocks where a stop loss order may fail to deliver the expected level of risk, this strategy can not lose more than the amount defined when the position is opened.

Traders will also know the potential return when the trade is opened, and they will know when the trade will deliver that reward by since options expire at a defined time. That means this a short term trade with limited risk and potentially high returns, a potentially attractive strategy for many investors.

You can read more in our latest free educational article that is available right here.

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