Market Commentary: How To 2x Your Money Even If You Miss The Move

It really sucks missing a big move, but it’s happened us all. The question is how do you profit from it after the fact, when it seems like the ship has already sailed. Below, I’ll show you a way that has the potential to 2x your money over time, even if you think you have missed out.

We’re going to use SoFi as the example, but many stocks fall into this category that can be traded for big wins. So without further ado, let’s pull back the curtain on this approach.

Missed The Massive Move?

Below you can see on Jul 31 that SoFi announced earnings and the stock gapped higher by as much as 20%+ during the day. This is the type of volatile movement that causes traders who have been eyeing the stock to throw their arms up in despair.

“I can’t believe I missed it, I’ll wait for the stock to come back down” they muse and buy it back at lower prices.

Of course, the reality is it it does fall back to earth, it’s probably on some negative news and that’s when fear creeps back in “maybe it will go lower“.

Damned if you do, damned if you don’t.

So do you play it?

One approach is to buy the stock post-earnings after the big movement while simultaneously selling a call options against the shares owned.

When we examined SoFi we saw precisely what that would look like:

Intraday on Jul 31 the stock traded at $11.52 while the at-the-money call option with 18 days to go to expiration sold for $0.75.

That’s a cost basis or risk of $10.77 per share, even though the stock is trading at $11.52.

What’s the catch?

By selling the call options at $11.50, you would be obligated to sell your shares at $11.50 upon expiration in 18 days, if assigned – which would happen if the share price closed above $11.50 on that Aug 18 expiration date.

The trade would produce a return on risk of 6.7% in 18 days. Not too bad, considering you missed the initial move higher. But you may not be impressed yet.

“Just” 6.7%, why would I accept that versus gamble on the next stock at earnings and possibly make 20%.”

That’s the difference in mindset between a speculator and an investor. The speculator will gamble on the risk of the stock going higher by 20% or lower by 20% and suffer the fallout. If the odds are 50:50 of good or bad news then invariably over time the returns of the speculator are zero; wins and losses cancel each other out.

On the other hand, the investor can be more confident that a stock, which has just reported great earnings will continue to power higher or plateau. Of course, some stocks will U-turn, so it’s not a slam dunk 100% guarantee. You just want to stack the odds in your favor more often than not.

But how do you double your money?

How Do You 2x Your Money

Simple. To do that, all you need to is repeat the strategy 15x. By locking in a 6.7% return each time, you can double your money by the 15th time you employ the strategy successfully.

But what if it goes wrong? What if the stock falls and reverses, you might wonder. Certainly, account for that scenario, and the way to do so is to cut your loss on the low of the day post-earnings.

Don’t let it reverse much beyond that before moving on to the next trade. That way losses are kept in check, and so maybe it doesn’t take 15 trades to 2x your money, maybe it takes 17 or 20. So be it. Stick to the rules. The odds and returns will favor you if so.