XME Trade: How To Find 160% Wins From Lower-Risk ETFs – March 17, 2022
It’s been a rough few months to be a trader. And it’s easy to see why. Some of the overnight drops we’ve seen in 2022 have been especially alarming…
In January, Netflix (NFLX) fell from $508 to $397 overnight. In February, PayPal (PYPL) collapsed from $175 to $132 overnight… and Meta (FB) dropped from $323 to $238 in less than 24 hours. And these are from some of the most popular stocks to trade!
In this extremely volatile market, owning individual stocks is a high-risk endeavor. It just doesn’t make sense.
That’s why I like to look at exchange-traded funds, or ETFs for short.
Unlike individual stocks that could bounce up and down like a red rubber ball, ETFs hold baskets of similarly themed stocks. Because they’re more diversified, they’re lower risk by nature.
In fact, this diversity offers protection. It slows everything down so the moves aren’t extreme. Plus, if you have the right idea but the wrong stock, you can still win.
Unfortunately, a lot of self-identified “traders” don’t bother with ETFs. They’re too “slow” and don’t see the same kind of “pop” that can come with individual stocks.
But that’s where my Smart Trades strategy comes into play.
This trading service takes all the benefits that ETFs have to offer — lower risk, wider net — and then targets them with call and put options to amplify their smaller moves into gains even the WSB forums would drool over.
It’s disciplined, easy to get in, and easy to stay in. I’ll show you exactly what I mean.
XME Calls: How To Multiply Gains On Lower-Risk ETFs
Earlier this month, we closed a trade in SPDR S&P Metals and Mining ETF (XME).
As you can guess from its name, this ETF is meant to track the performance of metal and mining stocks in the S&P 500. Its holdings include names like Alcoa Corp. (AA), Freeport-McMoRan Inc. (FCX), Royal Gold Inc. (RGLD), and Newmont Corp. (NEM) — just to name a few.
My rationale for entering this trade was fairly simple — XME had just crossed above a meaningful price level at $48.
By “meaningful,” I mean that this is a price that has been tested several times over and now represents a psychological level for many investors.
Throughout 2021, XME shares approached this level multiple times but never managed to break through. Then, in January 2022, we saw two more attempts… and two more failures.
Just a few weeks later, in mid-February, XME started a new run and finally managed to pierce this resistance line. I sent an alert to my readers telling them that XME had broken a key level at $48, and we were getting long.
On February 14, we bought XME calls for $2.50 each. Over the following two weeks, the shares climbed 10.4%. Not bad!
But again, this service doesn’t just buy and sell ETFs. We use options to multiply their smaller moves into worthwhile gains.
For this trade, we closed out our XME calls for $6.50 — a gain of 160%. That’s more than 15 times what we would have made buying shares outright.
Like I said… disciplined and easy. And with significantly less risk than trading a single individual stock like Netflix or Peloton.
Author: Christian Tharp