How To Ride Out Stock Market Reversals

 It is a crazy stock market these days.  Just about the time you began to see a trend forming. 

• Boom everything changes 
• A new pattern forms
• There is a sudden reversal
• News announcements are having more affect than ever on the Market.
• Sheer craziness

Being quick and nimble on your feet is a skill every great trader has learned.  They spot those changes and new patterns early and adjust their trades accordingly.

So let's get right into what you need to do in order to stay profitable even when the market reverses.

Most people in the trading world are not aware that I was a Latin ballroom dancer.  My husband and I competed internationally and did quite well.  

The same abilities to change quickly is needed in both dance and in trading.  If you stand there flat footed while all around you things are moving and changing you are going to get run over.

At Investing Buddies we don’t teach you how to dance, but we do teach you how to be nimble on your feet.  Our goal is that you learn to move and adjust quickly to changes just like a great dancer adjust to a new beat in the music. 

You are going to learn when to slow down and when to step quickly.  It is all in the rhythm of the Market

ADJUSTMENTS and BALANCE

Here is an example of what I am talking about.  This is the Market last week

Notice it was going down.  And had been for a couple of weeks.

All my trades were placed to take advantage of that down.  I was doing a trade I call OSO Good.  The name is kind of touch in cheek because OSO is bear in Spanish and It was definitely looking like a Bear Market.

My Oso Good trade is a debit diagonal PUT spread.

I buy a Put position in a future expiration about three months out.  That PUT is the engine driving the profits.  As the stock prices goes down, the option is gaining in value because of the down.

At the same time, I am selling a position out of the money in the current week .  The strike I choose to sell at is gauge by the usual weekly movement.  If the stock moves $5 in a week, I sell my strike $6 out of the money.  At the end of the week, it should expire worthless and then I sell the next week.  I consider these sold weeklies just a little gravy  on top of my trade.  Remember the bought position in the future is the profit engine on this trade.

This is a great trade as long as the price keeps going down,  But notice on Thursday last week - BOOM  -without warning the Market makes a sharp right and starts going up.  I needed to adjust my trade

What I do is leave the long future bought PUT just where it is or if it has made some good Profit I capture it by rolling my strike down to At the Money.

Then instead of selling out of the Money, I start selling the weeklies at the money to take advantage of the upswing.

This is just one example of staying nimble, on your toes and adjusting with Market Changes.  

If you are fairly new to trading options and what I describe has left you befuddled, don’t despair.  All you need is a little great education and we have that for you at Investing Buddies.  

If you are an experience trader and just need to see changes quicker and make adjustments to your trades efficiently, Investing buddies can help with that also.

Our Thursday webinar this week is a Deep Dive on becoming more nimble and learning ways to make these adjustments quickly so you don’t lose with the Market changes.  It fact these trade massages will help you see even more profits.  As bad as the reversal was on Thursday I still had a 1.7% gain for the week.

When I saw the reversal I quickly adjusted those trades to Selling diagonal PUT spreads

Simple

Keep the same bought position April 21st 

Sell March 10th expiration – At the Money

Want to learn how to adjust and be an effective trader?

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