More Stock Market Advice (trading on the downside) by Betterdaysahead

Thanks to reader Betterdaysahead for this very informative comment which I’m posting here for everyone to read more easily. 

betterdaysahead

In regards to trading the stock market and making money on downside action; I would say that one may want to look into and learn about trading stock options. They can by Puts to play any downside action (Calls for upside action). If they own the stock they can sell Calls. The positive side of buying an option is that the potential loss is limited to the actual amount of the cost of the purchase of the option.

For example, if one spent $1000 on a Dow Jones Index (DJX) Put option with the ideal the DJX is going down further, then if the market did go up the most that one could lose is $1000. There is a ton of info out there online for one to learn about option trading so one can do their research. In my experience, and if one was just getting started. I would suggest buying an option that will expire at least 90 days out, and that is either “at the money” or slightly “in the money.”

The full explanation of these terms can be learned in the many resources available online on how to trade stock options. It would take too much space here to explain. Option trading has limited risk and maximum profit possibility, and in many cases it would be better, and certainly does not require one to have a “lot of money” to trade options, as compared to trying to short sell an actual stock(s) which could lead to unlimited losses, even of money not in an account. So I would say to your readers that if they want to pursue making money in the markets on downside action they should strongly consider trading stock options. Additionally, the profits come faster and at a greater percentage rate than trading the actual stock.

More Stock Market Advice (trading on the downside) by Betterdaysahead