When I started learning how to trade options in August of this year, I happened across a stock that seemed to fit my criteria for making a trade. This stock was VAR and it met the criteria I had learned for being "overbought" as well as some other criteria that would lead me to believe that the stock would begin decreasing in value.

So I put in an order on my virtual trade tool to buy 5 put contracts for the November options at the $55 strike price (5 VAR NOV 55 P). The options were priced at $1.40, or $140 per contract. As long as the stock would go down, I would make money on the trade. Well, virtual money anyway.

I executed the trade on August 21st when the stock was at $64.13.

For the first month or so the stock did not close below $60, but also did not go above $65, so I was beginning to think this would just trade in a narrow range.

But then there was some less-than-positive press about the company and the share price took a big drop. When I sold the options on October 16th the stock price was at $41.94 and the options were worth $14.80, or $1,480 per contract.

That's a very nice return, but unfortunately that particular scenario is not likely to play out again.

There was a lot of luck in that trade in that bad news about the company came out at about the same time as the volatility in the stock market was going crazy.

But it does give an example of how you make a profit on a trade even when the news is bad.