Hey,
There's an old saying among traders … "fortunes are made in bear markets."
But have you ever wondered how 'sophisticated investors' make money hand-over-fist during market crashes … while ordinary, everyday people lose their life savings?!
Well, one of the main reasons this happens is because the 'smart money' — a term used to describe institutional investors and hedge funds — knows how to trade put options effectively during market downturns.
And this year is no exception…
A whopping $34.3 billion in put contracts has flown off the shelves in the past four weeks, $9.6 billion of which was bought in the past week, according to Options Clearing Corp data analyzed by Sundial Capital Research.
Commonly referred to as 'downside protection,' put options provide traders with a defined-risk strategy to insure their portfolio from destruction (or potentially make massive profits) in the event of a major crash in equities.
The indexes may be bouncing today — with the S&P 500 ETF Trust (NYSEARCA: SPY) up 2.4% at the time of writing — but nothing has changed my bearish outlook on the overall markets. Position yourself accordingly.
Later, I'll tell you some stories about how famous traders have used puts to their advantage, nailing some of the greatest trades of all time.
But first, let's talk about why put contracts can be such incredible vehicles for trading bear markets…
Tidak ada komentar:
Posting Komentar