I’m borrowing today’s title from an excellent WSJ article bythe “Intelligent Investor” Jason Zweig. An Investor’s Guide to Bottom Fishing gives some great pointers about howinvestors can prepare – and then activate – a smart buying strategy. Hesuggests filling your watchlist with stocks you’d love to own, so you can “goshopping on sale” when the market drops. He also advises using market dips asopportunities to rebalance your assets back to your desired allocation, and heswears by limit orders to help ensure your intentions get executed in aturbulent market reality.
Many TradeKing clients deploy an option trading strategy thattakes Mr. Zweig’s advice about forming a “shopping list” to the next level. Asan alternative to setting limit orders to buy stocks below their current price,these clients instead sell cash-secured puts against the stocks on their list,thus generating income while waiting for the stocks to move down and get “put” tothem. These educational links regarding this strategy may be of interest:
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- TraderNetwork forum discussion
- Review of this strategy from the Options Guy, Brian Overby
- UpcomingSnider Advisors webinar
Thus, options traders can face market declines with a moreoptimistic – or shall we say opportunistic? - attitude. As I’ve pointed outnumerous times in this blog and elsewhere, trading options literally can giveyou options – opportunities to profit in virtually every market condition,whether up, down, sideways, volatile or flat. Of course, you must beknowledgeable about the strategies you use and the potential risks and rewardseach entail. But many TradeKing clients who trade options will tell you amarket drop means they simply switch out their bearish tools from their tradingtoolkit. New market conditions mean new trading approaches – and freshopportunities to profit for the knowledgeable and disciplined.
If you haven’t done so lately, why not check out TradeKing’sEducation Center and filter content by market outlook? If you’re a confirmedbear, just go to Education > Learn byMarket Outlook > Bearish and see what interesting stuff you can find.You might discover your new favorite strategy and feel better equipped to facethe next market decline, whether now or in the future.
Good luck and happy trading to you!
CEO, TradeKing Group
[image: Keep Calm and Carry On by Jamie on Flickr]
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