We’re almost halfway through December, and it’s evident to me that this is the kind of month where the worst stocks can get a lot worse because of tax loss harvesting.
That’s where people sell some of their biggest losers in order to get a tax break for the year. In a nutshell, you sell your loser(s) to reduce your taxable capital gains, which can offset up to $3,000 of your ordinary income.
The deadline to sell is Dec. 31, and you’ll be surprised how much lower some stocks will end up closing out the year because of this phenomenon.
For example, there’s a stock we just scored a big win on in Link Trade Alerts that I see being under this type of selling pressure as we close the book on 2022…
We had the Dec. 16 expiration, $14 strike puts on Lucid Group Inc. (Nasdaq: LCID), netting a 213.5% gain* in exactly one calendar month, getting in at $1.70, and exiting at $5.33.
Of course, this was an above-average, atypical gain. Since the strategy’s inception on April 13, 2020, through Dec. 8, 2022, the options win rate is 42%, and the average return per position — including winners and losers — is 13.4% over an average 31-day hold time.
Short Squeeze, Tax Loss Harvesting Could Send LCID Popping and Dropping
Back to Lucid… This is a stock I can see selling off into the end of the year… Hell, it could hit $0 in the not-too-distant future as far as I’m concerned.
LCID is making new year-to-date lows as we speak — down about 80% — and this is a company that’s facing a complete credit crisis…
So it’s a perfect example of what I mean when I say “the worst getting worse.”
People were buying it like it was the next Tesla (Nasdaq: TSLA), and it may not even survive as a company…
I expect a solid squeeze higher in the next week or so, which could be a great time to trade back into it because it has a short interest of around 25%. We’ve seen a series of rallies due to short covering, so this thing could pop in the near term.
Be sure and check out Link Trade Alerts for more information!
*This is for informational and educational purposes only. There is an inherent risk in trading, so trade at your own risk.
P.S. Watch Lance LIVE TRADE the Open Wednesday Morning!
Let me ask you something…
When was the last time you traded IN FRONT of a major earnings beat?
Or… when was the last time you placed a trade BEFORE massive news of a company buyout…
Or… have you ever ended up on the right side of an FDA approval?
If you answered “never” to any of these questions…
You might want to give us your full and undivided attention — dramatic, we know!
Because this week, our very own Lance Ippolito is hosting a free training class…
His goal is to teach you how his traders have ended up in front of these types of stock boosting events time and time and time again…
And it’s going down at the opening bell at 9:30 a.m. ET sharp on Wednesday morning!
