Hit a Bullseye on Target's Bad News

Traders often overreact when it comes to real headlines that may turn out to be insignificant in the long term. With large-cap companies, these short-term selloffs are often great chances to sell LEAP put options. This strategy leaves plenty of time for the shares to completely process the bad news, and then to move on from whatever folks had been so worried about.

Wal-Mart's (WMT) Mexican bribery scandal was a recent example of this phenomenon. Shares of the retailer gapped down and remained lower for a few months in early 2012. Later on, it was reported that Warren Buffett's Berkshire Hathaway (BRK.A/BRK.B) was a buyer of Wal-Mart on that weakness....299 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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