Two Contrarian Plays in Energy

One of the main challenges in being a contrarian investor is that, even if you are right, you are almost always early. One of the primary ways I try to mitigate being early and lessen the pain of catching the occasional falling knife is the use of just out of money bull put spreads, especially on stocks that have good option liquidity.

I have found over the years this is a useful way to initiate and build a stake in a stock that has a lot of negative sentiment but has reached undervalued territory. This strategy has the benefit of providing some downside protection, can deliver lower entry points and also allows one to pick up some premium income as well.  I have used this tool many times to amass significant stakes in temporarily beaten-down equities, most notably Apple (AAPL) last spring when the company could not get out of its own way....472 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

Read the full story and get access to the Real Money Pro trading floor.

There’s no substitute for a trading floor to get great ideas, so Jim Cramer created a better one at Real Money and blogs there exclusively. We then added legendary hedge fund manager, Doug Kass, with his exclusive Daily Diary and best investing ideas. Staffed with more than 4 dozen investing pros, money managers, journalists and analysts, Real Money Pro gives you a flood of opinions, analysis and actionable trading advice found nowhere else, and allows you to interact directly with each expert.

Already a Subscriber? Please login.

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.