The Law of Physics Behind My Options Strategy

A key principle behind my new options service, Power Options, is one of the most important and powerful in all of finance.

Unfortunately, very few understand it, and that’s why they never become rich. Those who do understand it, on the other hand, can make a lot of money.

The principle I’m talking about is the principle of leverage. You probably remember the concept from high school physics. We use levers — like a car jack or a crowbar — to multiply our output of force from a relatively small input by many times.

This principle also applies in the stock market. By putting up a little amount of money you can control — and see potential gains from — a large amount of money.

Throughout history, entrepreneurs and financiers have used leverage to scale their ideas beyond what was possible with their initial access to capital.

Case in point, Facebook (FB) CEO Mark Zuckerberg.

Today he’s one of the richest people in the world, but he didn’t make all his money just by investing in his company the traditional way.  If he tried to grow Facebook using only his own capital, it would have taken decades to grow the company to where it was only a few years in.

But by taking on money from outside investors, Zuckerberg was able grow his business at an incredible pace, and leverage his initial stake to enormous heights. He controlled — and benefitted from— a huge investment through a much smaller initial stake.

Leverage took him from a college kid starting a business in his dorm room to being a billionaire in just a few years.

Hedge fund manager John Paulson did the same thing to make the greatest trade of all time.

He borrowed money from banks and used it to make leveraged bets on the housing market in 2007, and walked away with a whopping $20 billion.

This idea of using leverage to make big gains is what motivated me to launch Power Options. I wanted to bring the technique the richest folks on Wall Street and in finance to help the average investor.

I also realized that the key to a successful options trade hinges on picking the right stock, based on superior fundamentals. Most investors get caught up in “hunting” for the perfect option at the perfect price. But they fail to consider the most important element to the entire equation: the underlying stock.

So, I use my proprietary system to scour nearly 5,000 stocks per week and pinpoint those with growing sales and earnings that are sure to move higher over the next year or two. Once I’ve found the right stock, I do a second deep dive to find the safest, most lucrative long-term equity anticipation securities, known as LEAPS, to leverage the potential gains from my fundamentally superior stocks.

Take NICE Ltd. (NICE), for example. The stock saw a 107% gain in a little over two years, but using LEAPS options, investors could have seen back-tested gains of 233% in only six months.

Or the South American technology services company Globant S.A. (GLOB). The stock gained 127% in the year-and-a-half, but using LEAPS, investors could have turned it into back-tested gains of 624%.

The bottom line is that leverage is truly a powerful principle, particularly when applied to my LEAPS strategy at Power Options.

Perfect Timing

And we couldn’t be trading LEAPS at a better time. This morning the Dow topped another record high that was last set only yesterday! And the NASDAQ jumped over 1.8% after the opening bell as technology stocks staged a massive comeback from last week.

With pandemic relief checks on the way and interest rates stabilizing, I expect fundamentally superior stocks to benefit as we enter into another phenomenal earnings announcement season in April. They are also poised to benefit from quarter-end window dressing, which is when institutional investors make their portfolios “pretty” by buying fundamentally superior stocks before the quarter ends, as well as the 90-day ETF realignment. This ignites a wave of buying pressure under high-quality stocks and drives them higher.

The situation sets up the seven Conservative options trades currently in my Power Options Portfolio with even more profit potential. See, every trade is a play on companies that posted strong earnings results in their most-recent quarters. In fact, every one of these stocks has posted at least double-digit earnings and sales growth. And they all beat Wall Street’s earnings estimates, too.

Five of the options trades are currently under their buy limit prices, making now a good time to jump in before they start firing on all cylinders.

But these are just a taste of what’s to come. I look to continue adding plenty more trades to my Power Options Portfolio in the coming weeks and months. In fact, I plan on adding another trade tomorrow, so stay tuned.

For more details on building your options portfolio with Power Options and how to access my seven brand-new options trades, click here.


Louis Navellier

Louis Navellier

P.S. I am especially proud that my new Power Options service is easy for brand-new options traders and pros alike, as all of my recommendations are very straightforward and easy to follow. Click here now to join Power Options today so you can start trading today!

The Editor (Louis Navellier) hereby discloses that as of the date of this email, the Editor (Louis Navellier), directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:

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