Markets fell another 2% yesterday as COVID-19 continues to halt economies around the world. Stocks are down nearly 40% since February, but that doesn't mean you have to lose money. Today, we'll show you how to make money when stocks go down.
Late Sunday night, the Senate announced it was not able to agree on a $2 trillion stimulus package for American businesses and citizens.
Futures were down 7%, and trading was halted again in on U.S. stocks. Wild volatility and market halts seem to be the new normal on Wall Street these days...
On the news of the Fed launching "QE Infinity" Monday morning, the Dow initially rallied 1,000 points... only to give back all of those gains and more by the end of the trading day. The Dow closed down another 600 points.
As more states enact "stay in home" policies, many nonessential businesses are seeing their revenue abruptly fall to zero overnight.
If you believe that the current stock market crash has further room to fall and you want to protect your downside, then you have to learn how to make money when the stock market goes down.
Take Action: Market volatility has everyone on edge, but we have three steps you can take to protect your money and even set yourself up to profit. Click here...
Fortunately, it's not that complicated. And we'll show you exactly how it's done...
Here Are the 2 Best Ways to Make Money When Stocks Go Down
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There are two ways to make money when stocks go down. We'll walk you through both, but the second strategy has much higher upside and much lower risk, which is exactly what you want during times like these...
One way to make money when stocks go down is by "short selling." In order to short a stock, you first need to open up a margin account with your brokerage company.
Once you've found the stock you want to short, you can borrow that stock and sell it on the open market for cash.
Here's how you make money: When the stock goes down in value, you buy the stock back for less than you sold it for. And the difference is your profit.
The one major risk of shorting stocks is that your losses are unlimited. In theory, the stock could go up in value infinitely.
If you're shorting in today's environment, make sure you are NOT shorting companies that have a high probability of getting bailed out by the government. That would likely send the stock roaring higher.
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The second way to make money to make money when stocks go down is by purchasing put options.
A put option contract allows you to sell a stock at an agreed-upon "strike price" in the future.
Put options allow you to control 100 shares of stock for a fraction of what it would cost to own 100 shares of the underlying stock.
This is the preferred way by most investors to make money as stocks fall. That's because you can often make gains of 100% or more when the underlying stock only moves 10% (if it happens in the right period of time).
Just look at this coronavirus options trading strategy that bagged our readers 1,000% gains.
Unlike with short-selling, the most you can lose when buying put options is what you put in. This is a major advantage. You can limit your losses to the premium you pay to own the put options.
Best of all, here at Money Morning, we can show you exactly how America's No. 1 Pattern Trader, Tom Gentile, is trading the current market environment for profit now.
Tom has built his multimillion-dollar fortune trading options with his proprietary formulas for over 30 years.
And earlier today, he released four of his best ways to cash in on this bear market.
You can get them absolutely for free, here.
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