Going Against the Herd I'll reveal yet another stock market secret. Most investors tend to extrapolate a stock's recent direction indefinitely into the future. For that reason, stocks that have fallen hard recently tend to be viewed as riskier than stocks that have run up in value. Six months ago, stock market analysts were predicting shares of Tesla (NSDQ: TSLA) would soon rise above $400. That was when TSLA was trading a little below its all-time high price at $350. Today, it can be bought for around $225; that's a loss of 35%. Conversely, you couldn't find many investors willing to buy Xerox (NYSE: XRX) at the start of this year when its share price dipped below $20. Now priced at $35, you could have bagged a 75% profit in less than six months if you had the guts to go against the herd. Speaking of herd mentality, the health care industry has been getting a lot of media attention lately, most of it bad. That's due in part to presidential candidate Bernie Sanders promoting his "Medicare for All" plan, which would severely limit profits for most medical companies. In particular, drug manufacturer Bristol-Myers Squibb (NYSE: BMY) has taken a beating. Since cresting above $62 on October 1, BMY has fallen to $45. That's a decline of 27% in just nine months. A few days ago, you could have sold a put option on BMY that expires in three months at a strike price of $43 for a premium of 50 cents, or $50 per contract (one contract is based on 100 shares of stock). You get to keep the $50, regardless of how BMY trades after that. Either Way, You Win If BMY never drops below $43 by September 20, the contract expires worthless. Congratulations, you just made $50 for doing almost nothing! But what if BMY does fall below $43 before your option expires? For that to happen, BMY would have to drop another 8% from where it is now. I don't think that is likely, especially if its proposed acquisition of immunotherapy developer Celgene (NSDQ: CELG) gains regulatory approval. However, if BMY does fall below $43 before expiration, you would have to buy the stock at that price. That's the bad news. The good news? If that happens, you'll own BMY at a share price that equates to about nine times forward earnings. That's cheap. Also, as long as you own those shares, you are entitled to receive BMY's dividend that would equate to a 3.5% annual yield at that price. That income is in addition to the options premium you received when you opened the contract. When managed correctly, this strategy produces a steady stream of income that far exceeds what you can earn from bonds. Too good to be true? Yes, if you don't know what you're doing. But I know someone who implemented 49 trades of this sort last year… and made money on every single one of them! I can't divulge the details of that trading strategy here, but I can tell you where you can find them. My colleague is lifting the veil on this proven approach, but only for a limited time. Click here to learn more. | 
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