How the Recent Market Pullback is a Blessing in Disguise

Recently, Dow Jones Industrial Average reduced by 5.3%. Prior to this fall, the stock was enjoying a continuous rise of more than 60% and it seemed as though there was no end in sight.

Unfortunately, there was more in stock (no pun intended). The next Monday, due to selloff, the Dow further came crumbling down by 1500 points.

It is not a question of whether it will happen again or not. Market pullbacks like this always occur. When they do, the more important question is if you should be worried.

Here’s the Reality

A continuous rise in the stock value can be deceiving. In fact, a drop in prices is needed and they serve as an indicator of reality in a seemingly unreal world of stock market trading.

Increased volatility reduces confidence level among investors. It’s almost impossible to predict with certainty, how long such volatility will continue.

The optimist investor is eager about bull market, but it might take quite a long time to see such. However, this volatility can be a blessing in disguise.

Volatility Brings Opportunity

Market pullbacks send investors hiding. However, selloffs can provide better entry points for trade if planned carefully.

Here’s how.

Stock Market Raiding

This is a technique where you capitalize on the slight increase in stock value to make a profit that is about 10 times your investment capital. Using this approach, a 3.1% increase in Sanderson Farms stock led to 36.4% profit.

Even a 7% increase in Alibaba’s stock value led to a 69% return. You see, taking advantage of these small market moves is far easier than trying to predict long stock trends take months, even years to play out.

Option: The Key to Stock Market Raiding

Options trading, if properly executed, will give you mouth-watering return. The problem arises when options trading is approached like a gambler- trying to pocket in 1000% gain on a 20% rise in stock price in few days.

By going after such unreasonable gain, your risk exposure is substantially increased and you are sure to lose 80 – 90% of the time.

However, by going the way of a stock market raider- going only after little, easy-to-capture stock movement, the risk of failure is dramatically reduced. By applying such a tactic, you get returns over 10 times of your investment.

Here’s an example, the recent market confusion provided us with a gift: a chance to get a better entry price on two recent trades.

The share prices of both Cemex (NYSE: CX) and McDonald (NYSE: MCD) have dropped a little. This occurred as a result of the selloff and has presented the opportunity to average down on cost by obtaining better entry prices.

Experts were able to anticipate a strong growth trend that continued pushing prices. Being established in both trades, with the summer option expiration coming in a few months, they have been able to anticipate leveling out some storms that would arise.

Having entered the trade at lower prices, making a profit is more feasible. Some profits have even been made when about half of their MCD trade was sold for an 18% gain.

By taking advantage of proven option strategies, it is possible to navigate through the market’s volatility seeing right through every potential opportunity or threat.

We owe all this to the power of options trading. This great tool, if harnessed properly, can bring about profit from both the upside and downside of an individual stock, with very little risk capital paid as premium.

In fact, by applying this strategy, returns of up to 35%, 40% or even more is possible in just a matter of weeks, not months, certainly not years.

Conclusion

Future market prediction is most times grey, but opportunities must be sought after constantly. By taking advantage of the modern technology that exists, models and algorithm can be run and then analyzed to see if there are any good signals to either buy or sell.

In summary, stock market raiding using options trading is certainly the best chance you have of maximizing your returns. This is because you can get greater rewards with substantially smaller risk and capital involved.

— The Option Specialist

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About the Author: The Option Specialist