Here’s one thing I’ve learned after 35 years of trading stocks and options… and recommending trades to clients and subscribers…
The most unpopular trades are the most likely to be profitable.
Don’t ask me to explain it. I can’t.
If you’ve followed me for any length of time, then you know I’m a contrarian at heart. I look for lower-risk trades, which by nature tend to be out of favor. And we profit as the trend reverses…
But human emotions never change. Everyone wants to be in the hot stocks and the hot sectors. Risk isn’t a concern for most folks. Their focus is on the reward.
So back when I originally started recommending trades in the retail sector – even though we had tremendous success trading retail stocks up to that point – my subscribers were ticked off.
For example, a few years ago I recommended selling uncovered put options on Macy’s (M). We weren’t betting on a big rally in Macy’s shares. We were just betting the stock wouldn’t fall much further.
To me, it seemed like an easy bet. At the time, Macy’s was trading for seven times earnings, and it paid a 7% dividend. Besides, we had sold uncovered put options on Macy’s three times previously. Those trades generated returns of 15.3% in 12 days, 12.9% in 45 days, and 28.3% in 27 days.
Those are enormous gains in such a short span of time… especially when it was unfavored by the market. So, I figured my subscribers would willingly jump at the chance to sell another series of uncovered put options on Macy’s when I recommended the trade a few months later.
You wouldn’t believe the vitriolic email I received after that recommendation.
That’s when I knew for sure we had a winning trade.
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You see… when even the folks who know I’m a contrarian trader HATE a trade I’m recommending, then I know it’s going to be a winner. So after recommending the Macy’s trade – which generated better than a 13% gain in 36 days – I got more aggressive in the retail sector.
I told subscribers to buy speculative call options on Bed Bath & Beyond (BBBY).
That trade produced a 117% gain in just two weeks. But you wouldn’t believe the heat I took on that recommendation.
Folks thought I was nuts. Some people canceled their subscriptions because of it. And the feedback I got… well… let’s just say it was less than flattering.
Fast forward to today…
The only sector that I think offers a low-risk/high-reward setup is gold stocks. I’m a big fan of gold stocks right here and I’ve made a few recommendations to my subscribers on how to profit off of the situation.
And they’re groaning. Seriously… even my subscribers – who know I’m a contrarian trader – are repulsed by the idea of buying gold stocks. Nobody wants to buy this sector.
That’s why I know it’s a winning trade.
Best regards and good trading,
What are some gains you’ve made from Jeff’s previous contrarian trades?
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