16 ideas that could make you insanely rich

 

Why is it that some people persist in referring to stock and options markets as a “big casino?' Don't they know that the markets are for sensible investors, not gamblers who are trying to get rich over night? Why, no serious investor would be caught dead trying such a scheme…

Then again, who said we investors always have to be serious?

I for one, sometimes take a small amount from my portfolio – no more than 5% now (10% when I was less than 35 years old) – and swing for the fences, knowing that I might never see the money again. I've had a few big wins in speculative stocks and options markets, and though the losses are more frequent, I've still come out ahead.

If you put money into these trades that you can't afford to lose, you are just asking to get creamed. That should be adequate warning for those who will hear it.

There are a great many ways to make these kinds of bets (and bets they are). I will walk through a few of the possibilities. Keep in mind that you can always create a high-risk / high-return trade on a stock, if you know how. The best thing to do, once you've accepted high risk, is to make a trade that feels right, given your feelings about the underlying stock. That's why I've proposed both bearish and bullish trades on stocks that tend to be polarizing. If you are an investor, you will almost certainly have bearish or bullish sentiments about at least one of these stocks.

As the Pet Shop Boys say in their song Opportunities…

“Oh, there's a lot of opportunities

If you know when to take them

You know there's a lot of opportunities

If there aren't, you can make them.”

Twitter (TWTR) $31.28

Why to love it: Twitter is the hot new social platform, a global conversation, and the last great American Internet IPO.

What to do about it: Buy November 46 TWTR calls for $1 each.

What will happen: If TWTR is below $46 in six months, you will lose everything you invest. If TWTR goes back to its high of $73 before then, an investment of $10 K will be worth at least $270 K.

Why to hate it: Downward momentum. Plus slowing growth numbers and an end-of-2015 P/E Ratio of 126.

What to do about it: Buy November 21 TWTR puts for $0.85 each.

What will happen: If TWTR is above $21 in six months, you will lose everything you invest. If TWTR falls to $11 before then, an investment of $10 K will be worth at least $117 K.

 
Chart courtesy of stockcharts.com

Tesla (TSLA) $198.79

Why to love it: Gasoline keeps getting more expensive, so the electric car becomes more and more desirable. Eventually, that's all there will be.

What to do about it: Buy December 300 TSLA calls for $4 each.

What will happen: If TSLA is below $300 in seven months, you will lose everything. If TSLA doubles to $400 in that time, an investment of $10 K will be worth at least $250 K.

Why to hate it: Based on its current price, you'd think it was already supplying half the world's cars, yet many states are banning Tesla sales. Also, it is already limited by the availability of lithium.

What to do about it: Buy December 140 TSLA puts for $6.50 each.

What will happen: If TSLA is above $140 in seven months, you will lose everything you invest. If TSLA falls to $80 before then, an investment of $10 K will be worth at least $92 K.


Chart courtesy of stockcharts.com

Baidu (BIDU) $163.26

Why to love it: Baidu is Chinese Google (GOOGL), and Chinese Internet use is rising faster than U.S. Internet use, as is the size of the Chinese middle class.

What to do about it: Buy December 220 BIDU calls for $3.25 each

What will happen: If BIDU is below $220 in seven months, you will lose everything. If BIDU doubles to $326 in that time, an investment of 10 K will be worth at least $320 K.

Why to hate it: There is reason to be skeptical of Baidu's numbers, given the relative opacity of the Chinese financial world, plus, China's real estate boom appears to be headed toward a bust, and that could drag down the whole economy.

What to do about it: Buy BIDU December 95 puts for $1.15 each.

What will happen: If BIDU is above $95 in seven months, you will lose everything you invest. If BIDU falls to $50 before then, an investment of $10 K will be worth at least $390 K.


Chart courtesy of stockcharts.com

3D Systems (DDD) $50.67

Why to love it: 3D Printing allows for the virtual to be made actual. Anything that can be dreamed up on a computer can now be made real, and 3D Systems allows things to be made of all kinds of materials, even metal.

What to do about it: Buy DDD November 80 calls for $0.60 each.

What will happen: If DDD is below $80 in six months, you will lose everything. If DDD doubles to $101 in that time, an investment of 10 K will be worth at least $350 K.

Why to hate it: This is just a manufacturing process like any other, and though 3D Systems seems like a decent company, the stock, with its P/E Ratio of 119, is overvalued.

What to do about it: Buy DDD November 32 puts for $1.13 each.

What will happen: If DDD is above $32 in six months, you will lose everything you invest. If DDD falls to $20 before then, an investment of $10 K will be worth at least $106 K.


Chart courtesy of stockcharts.com

iRobot (IRBT)  $32.66

Why to love it: How can you not love a company that makes robots that clean the living room, explore Mars, dive to the bottom of the ocean and even keep U.S. soldiers alive?

What to do about it: Buy IRBT December 49 calls for $0.65 each.

What will happen: If IRBT is below $49 in seven months, you will lose everything. If IRBT doubles to $65 in that time, an investment of 10 K will be worth at least $246 K.

Why to hate it: Negative quarterly earnings growth and a profit margin of less than 5%.

What to do about it: Buy IRBT December 22.5 puts for $1.20 each.

What will happen: If IRBT is above $22.50 in seven months, you will lose everything you invest. If IRBT falls to $11.50 before then, an investment of $10 K will be worth at least $83 K.


Chart courtesy of stockcharts.com

Oracle (ORCL) $41.63

Why to love it: As the enterprise software used by large companies of every description, Oracle makes money hand over fist.

What to do about it: Buy ORCL December 48 calls for $0.62 each.

What will happen: If ORCL is below $48 in seven months, you will lose everything. If ORCL has risen to $53 in that time, an investment of 10 K will be worth at least $183 K.

Why to hate it: Because the companies that use it usually do. There are a lot of companies dedicated to replacing Oracle, and if one of them starts to get traction, things could start to move fast.

What to do about it: Buy ORCL December 35 puts for $0.78 each.

What will happen: If ORCL is above $35 in seven months, you will lose everything you invest. If ORCL falls to $28 before then, an investment of $10 K will be worth at least $174 K.


Chart courtesy of stockcharts.com

Amazon (AMZN) $304.83

Why to love it: Amazon has rewritten every rule regarding the distribution of goods. One by one, they will replace every remaining brick and mortar retailer.

What to do about it: Buy AMZN October 375 calls for $3.35 each.

What will happen: If AMZN is below $375 in five months, you will lose everything. If AMZN has risen to $475 in that time, an investment of 10 K will be worth at least $298 K.

Why to hate it: Amazon has never made much money. There's P/E Ratio of 475 to consider, as well as a profit margin of, wait for it—0.38%.

What to do about it: Buy AMZN October 235 puts for $3.15 each.

What will happen: If AMZN is above $235 in five months, you will lose everything you invest. If AMZN falls to $180 before then, an investment of $10 K will be worth at least $174 K. (Not a typo—the return here is the same as described for the ORCL bearish trade by coincidence.)


Chart courtesy of stockcharts.com

Trulia (TRLA) $35.50

Why to love it: Trulia provides a tool to research houses and neighborhoods online. Perfect as the housing market comes back to life.

What to do about it: Buy TRLA December 50 calls for $2.50 each. 

What will happen: If TRLA is below $50 in seven months, you will lose everything. If TRLA has risen to $70 in that time, an investment of $10 K will be worth at least $80 K.

Why to hate it: The space is crowded, and Trulia has only barely demonstrated that it can turn a profit.

What to do about it: Buy TRLA December 25 puts for $2 each.

What will happen: If TRLA is above $25 in seven months, you will lose everything you invest. If TRLA falls to $13 before then, an investment of $10 K will be worth at least $60 K.


Chart courtesy of stockcharts.com

Julian Close has been a business writer since the first day of the twenty-first century, having written for PRA International and the United Nations Department of Peacekeeping. He graduated from Davidson College in 1993 and received a Master of Arts in Teaching from Mary Baldwin College in 2011. He became a stockbroker in 1993, but now works for Fresh Brewed Media and uses his powers only for good. You can see closing trades for all Julian's long and short positions and track his long term performance via twitter: @JulianClose_MIC.

Julian Close

Julian Close

Julian Close became a stockbroker in 1995. In his 20 years of market experience, he has seen all market conditions and written about every aspect of investing. Julian has also written extensively on corporate best practices and even written reports for the United Nations. He graduated from Davidson College in 1993 and received a Master of Arts in Teaching from Mary Baldwin College in 2011. You can see closing trades for all Julian's long and short positions and track his long term performance via twitter: @JulianClose_MIC.

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