Stocks with a Zacks #4 Rank ('sell') or Zacks #5 Rank ('strong sell') will typically underperform the market over the short-term, which is perfect for this strategy.
With put options, direction and time are important as well. And if they are below their major moving averages like the 50-day and 200-day moving averages, even better. Focus in on the ones with downward earnings estimate revisions. Look for stocks trading at excessive valuations. If you're bearish, you can buy a put option and make money as the price goes lower. Zacks #1 Rank ('strong buy') stocks are ideal for this as these are some of the likeliest candidates to move and profit with this strategy. When buying call options you need to be right on the direction of the trade as well as the time allotted for it to move. These are stocks that are on the move with some of the most explosive upside potential.
Momentum stocks and Aggressive Growth stocks are probably the best kinds of stocks to use for this. If you're bullish on a stock, you can buy a call option and make money as it goes up.
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