Only four months ago, social distancing were two words we’d never heard of. Now, those 16 letters just about run our lives.
The new status quo isn’t just keeping us from going to concerts or visiting Grandma – it’s affecting everything, right down to the way we shop.
And once the pandemic hit, and shelves were nearly empty?
Forget about it!
I’m not the only one either.
Many are choosing to stay home and shop online – and one industry is absolutely booming as a result.
While overall U.S. retail sales plummeted as a result of the coronavirus, falling 16% in a single month for a record drop, ecommerce sales are expected to rise 18% in 2020, according to a recent forecast by eMarketer.
Since lockdown restrictions were relaxed, coronavirus cases have dramatically spiked around the world. Seven U.S. states, in fact, just reported their highest coronavirus hospitalizations since the pandemic began. And the CDC warns that this number will skyrocket once the summer is over.
The ecommerce industry is on fire, and it’s only going to get hotter.
Here are three ways to capitalize on one of the hottest industry trends in decades…
How to Trade Your Way Through the Market’s Top Industry
1. Trade the Leader of the Pack
Hands down, Amazon.com Inc. (NASDAQ: AMZN) is the “biggest and baddest” dog in the ecommerce pack. With a market cap of $1.38 trillion, AMZN accounts for 38.7% of the entire ecommerce space. Walmart Inc. (NYSE: WMT) comes in at a distant second with 5.3%.
Stats aside, all you have to do is look at a stock chart to know the third most valuable company in the US is red-hot – and stacked with profit opportunity.
AMZN dropped in sympathy with the rest of the market correction after COVID-19 burst on the scene, but quickly gained footing and rose an impressive 71% over the next three months, setting a number of all-time highs in the process.
Now, the simplest thing would be to buy the stock. But there’s a catch. As I write this, AMZN is trading at $2,764 per share. 100 shares would cost you $276,400!
Personally, I never want to spend more than $500 on one trade. If you’ve been a Power Profit Trades reader for a while, then you’ll know that’s one of my top rules of trading.
That’s why I always recommend flipping the stock instead of buying it. This lets you trade the stock for a lot less money without sacrificing your profit potential – and you can do it with options.
For example, you can buy an AMZN Aug 21, 2020 $2,780 Call for $149, or a total of $14,900 for control over 100 shares.
Still too costly? The discounts don’t end there. You can also buy a call spread.
By selling a higher strike call against your lower strike call, your total cost in the trade is reduced dramatically, as shown below:
This reduces your total investment to $900 for control over 100 shares with a potential $1100 profit – that’s over 100%! And here’s the best part… you only need AMZN to be at or above $2,800 on August 21 to double your money. If AMZN continues its meteoric run, that’ll happen way sooner.
2. Trade the Pack Itself
The ProShares Online Retail ETF (NYSE: ONLN) is an exchange-traded fund that tracks the online retail sector. At $52, it’s currently trading at a fraction of the price of AMZN.
As you can see in the chart below, it contains the biggest names in the industry. Unsurprisingly, AMZN is the heaviest-weighted stock in the index.
As a result, the chart of ONLN is virtually identical to that of AMZN.
Given the high correlation with AMZN, you could choose to buy ONLN instead… for a lot less money. Also, as an ETF, it is diversified across numerous ecommerce stocks, providing additional protection in the event that AMZN corrects for any reason.
To your success,
Source: Power Profit Trades