Wouldn't it be great if we could book 50% profits in 24 hours? It's not just wishful thinking, even in this market. Last week, I told my Trending123 subscribers to buy the September puts for Potash (POT)–we bet that the underlying stock would plunge. I closely monitored this trade and because it was well-managed, we locked in 50% profits in just over 24 hours! And that's not all–we were able to buy back the puts this week for an even cheaper price as the stock temporarily "bounced;" much like the quarter on the steps.

Betting Against Stocks

In this volatile market betting against select groups of stocks can be a very profitable investment strategy. The two most common ways for traders to profit when the value of an underlying asset decreases are put-buying and short-selling (see also, "Trade Options like the Pros").

Now, I tend to prefer the former method because the potential losses incurred tend to be less severe. An options trader can limit the amount of loss, while short sellers are more profoundly affected if the stock heads in the wrong direction. The purchaser of a put option, on the other hand, can choose to not sell at the agreed upon strike price and simply lose the initial premium.

You must remember that big gains or losses in stocks happen quickly, so it's important to constantly keep an eye on your options portfolio. When your position turns profitable, stay alert because your ultimate goal is to maximize your gains, and to do so you must act quickly (see also, "2 Ways to Profit From Options This Summer"). The tables are always turning…

"Put" Your Money Against This Sector

Oil prices spiked over $6 in a single trading day recently as investors panicked over the potential fallout from Tropical Depression Fay. But the price hike was short-lived, as the entire energy complex rolled over the following day. In fact, the last time natural gas grazed these low levels was in January of this year! In the past month alone, natural gas and oil have dropped a whopping 43% and 23%, respectively.

A lot of my investment strategy has targeted the energy complex's decline, so at first glance the $6 surge seems to run counter to the profit-making conditions I seek. The recent spike, however, unlocked a plethora of new investment opportunities!

What's been happening is that we get sharp countertrend moves driven by events much like Fay, which temporarily drive prices higher. As I talked about earlier, these price spikes–or bear flag "bounces"–present fantastic put-buying opportunities for investors who like to play the options game.

If you look at a monthly chart of the Natural Gas Index, you'll see a pronounced downward trend in the long term price movement of stocks within the index. If you narrow the view to a daily chart, you'll notice a series of bear flags, which ultimately lead to new to natural gas price lows.

These countertrend bounces are ideal for put-buyers because when the underlying stock's value declines further, we lock in huge profits!

Remember, buying options on highly-volatile stocks is ideal because options expire, which means you get a limited amount of time to work with. The most profitable plays are on volatile stocks that experience wide price swings. The energy sector fits this criteria impeccably–$6 swings up or down are a great way to cash in on the broader market's volatility.

But a final word to the wise: Always plan your trades before you play–if you don't know your entry and exit points, the losses you incur will start to mount. Heed this advice and this investment strategy will lead you to profits!

Down days in the market can disrupt the focus of traders and throw them off their trading plan. But not John Lansing's subscribers! They have tremendous focus, and you could, too. Don't accept losses and forgo gains. Join Trending123 today and ride this market all the way to the top!

Also in this issue:

• Obamanomics
• Hidden Fees Your Broker Won't Tell You About