Option Trading In A Market Crash - How I Profit

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#Investing #Stocks #OptionTrading
The question on everyones mind right now is - when should I start buying the dip? Well using the word dip is pretty generous - we have companies down 40-50-60% from their highs. In todays video we will break down an easy strategy that many professional investors use in these type of environments.

The first thing you can do is to buy protective puts. This is probably the most common way to hedge. You buy shares in a company and then buy a put against it for protection - so if the company goes down, your put contracts make money. Another alternative is to buy put contracts on the entire index as well that could protect your portfolio as a whole. The next thing would be to sell covered calls. This is another way to minimize your losses because you sell a call above the current stock price, and collect a premium. As the stock moves down that premium you collected will act as a balancing act for your losses on your long stock position. Another trade you can make in the short term is to buy call options in the VXX, which tracks the Volatility Index. This is commonly known as the “fear gage” and has an inverse correlation to the S&P 500. So when the S&P crashes down, the VIX shoots up. So when you think tensions are high and uncertainty is high then you can hedge your position by betting on volatility going up. Now if you don’t want to necessarily invest using options - which there are pros and cons to - you might want to look at an INVERSE ETF - something like SPXS which is the leveraged inverse ETF of the S&P 500 index.

It’s time to start choosing companies you want to own for the long term. Buying good solid companies and holding is the simplest and most affective way to grow wealth - yet many don’t do it - maybe because it sounds too simple. Ok I buy and then what? Just hold…ok but then…just buy and hold. Yea but what if I - Just buy and hold. So at these new low prices we are seeing it’s time to start creating our portfolio. Now you can go further into valuing these companies, looking at their income statements and things like that but first things first ask yourself - what companies will be here in 10 years time. 20 years time. Which companies are not going away. Once your list is done we can move on to the next step.

Now to do this you are going to need to have cash ready to buy at least 100 shares of the given company. For example, if I want to buy Dropbox I would need $2100 to buy 100 shares. Palantir I would need $1,000, PayPal, around $10,000 - so obviously being able to buy 100 shares of a company is going to depend on the share price - this is why it’s so important to be able to have consistent income from your job or business that you can save and invest. Make as much as you can on the income side and put that money to good use rather than just having it in a savings account and losing 2% per year to inflation.

Next you will sell a put on a stock you would like to own - now if you are happy buying at these prices, then logic would have it that you would be even happier to own them at lower prices. So let’s say the price of your favorite stock is sitting at $50 and you sell a put while having the appropriate cash needed to buy 100 shares of the company as collateral. You sell a put with a strike price of let’s say $47 and you collect a premium for selling that contract. Say you collect a $2.00 premium - and because each option contract controls 100 shares you’ll be paid $200 straight into your account. Now if the stock dips down further to $47 by the expiration date then you will be assigned shares of the company.

Ok what comes next is the important part. (Watch full video for strategy breakdown)

I am not a financial advisor - none of the above video is meant to be taken as investment advice. I am just showcasing MY own strategy and my investments should not be tried and duplicated based solely off the information in this video for risk of losing money.