Investor Insights:

  • I’ve written about seasonal trades a couple of times in the past few weeks.
  • Thanksgiving provides us with our next seasonal opportunity.
  • You can increase your potential gains, and limit potential losses, with this one quick strategy.

I start thinking about the holidays in early November. That’s when I plan my gift list … and begin to realize how expensive Christmas will be.

Today, I want to help you start planning too. In fact, I’m going to show you an old trader’s trick that can help you fund your holiday dreams.

See, most years, the trick I use to help pay for all that is this seasonal trade.

Start With the Calendar

I’ve written about seasonal trades a couple of times in the past few weeks.

Halloween provided a new trading opportunity that handed readers gains for using call options.

I also recently highlighted a Fed Day trade.

The Federal Reserve meets every six weeks. Since Jerome Powell was named chairman, I’ve used a simple trading strategy to benefit from the Fed’s regularly scheduled meetings.

Using options, that trade delivered a one-day double-digit gain. Congratulations if you grabbed any of those wins. You did the work, and it paid off.

Now, Thanksgiving provides us with our next seasonal opportunity.

The Perfect Short-Term Strategy for Thanksgiving

There’s a strong tendency for the stock market to rise in the days around a holiday. I noticed this tradition decades ago, and I’ve made a lot of money from my holiday trades since then.

For example, buying two days before Thanksgiving and selling after the holiday is consistently profitable.

This strategy can be applied with an exchange-traded fund (ETF). An ETF is a low-cost way to track an index. They’re an ideal vehicle for short-term trading strategies like this.

Traders can use the Invesco QQQ Trust (Nasdaq: QQQ). It’s an ETF that tracks the Nasdaq Composite Index.

Your Complete Holiday Options Trade

You can increase your potential gains, and limit potential losses, with a call option.

A call option gives the buyer the right, but not the obligation, to buy the ETF at a specified price at any time before the option expires.

You won’t have to exercise the option to collect a gain. You could simply close the option with a sell order.

Options offer defined risks. You can never lose more than you paid for the option. This means risks are small in dollar terms since options usually trade for just a few hundred dollars or less.

For QQQ, traders could buy the December 6 $200 call options.

When you purchase one of these, it gives you the right to buy 100 shares of QQQ at $200 any time before December 6.

But you don’t have to worry about that.

The rules for this trade are as follows:

  • Buy call options at the open on the Tuesday before Thanksgiving.
  • Sell at the open on the Monday after Thanksgiving.

That’s it. Those are the complete rules.

Trading Thanksgiving has been a holiday tradition for me for a long time, and it’s one that’s unlikely to change.

So you can be sure that it’ll keep you updated on the best ways to trade the holidays. Stay tuned for more.

Regards,

Michael Carr, CMT, CFTe

Editor, Precision Profits

P.S. I use this strategy in Precision Profits, where I combine the calendar with a unique momentum indicator that identifies changes in the level of greed and fear.

To learn more, click here.