Shorting the market? Watch this first! // Short selling strategy, buying put options, short selling strategy, shorting the stock market, short selling explained, put options trading, short selling example welcome to looking at the markets with David Moadel today is September 12
2016 and I just wanted to make a quick observation about shorting the
market or buying puts or put spreads debit spreads when the market is a bit
toppy when it gets a little too high what's yeah how do you time that well I
don't try to time the market my timing is never going to be perfect
of course nobody's timing is perfect i initiated some debit vertical put
spreads when I thought the market had just gotten too high back in july july
eleventh so when SP why was in the low to Thirteen's it was 213 something
right around here I pass excuse me i bought some some put spreads
lots and puts insults inputs and what happened was
I'm my timing was certainly not perfect because after I did that the market went
sideways with a slight upward drift for two months and then on friday the market
zoom went down big down day about two and one-third one-third percent down in
one day and then this morning I sold off all of my i liquidated all of my
involvement put spreads and I made a slight profit
and I was worried about theta decay time decay eating away you know deteriorating
my-my puts but the volatility picked up so much that you know when it was
implied volatility spikes that will help your your options your long options will
certainly be helped by that so so i was able to not only break even but not only
break even but actually a profit a little bit and the problem was that i
just got into early and I learned a big lesson from this
it's a lesson that I already knew but now i'm going to to take it more
seriously which is you probably don't want to initiate puts you don't want to
buy puts right after a really sharp v-shaped rally in the markets you know
that this was the brexit decline back in late june and $MONTH and then the market
it went down for a couple days and then it came right back up within about three
days here came right back up
and then you know just rallied and rallied and rallied and I i put on the
the put the put spreads here but the lesson I learned was don't you probably
don't want to short the market or buy puts on SP why right after a sharp
v-shaped rally and and this was as sharp as it gets I mean it went right back up
with if within a few days like three days so and then it was it was all the
way here that it hit the all-time high at that time within within a week and a
half or so so right after a super-sharp v-shape rally you might want to wait
wait maybe a few weeks before you jump in with shorting shorting the market or
buying puts for example if i had bought puts a little bit later like you know
over here or over here I would have done better because I wouldn't have I would
not have experienced all of the the time decay from from here all the way to here
ok another example of a really sharp v-shaped rally we had a w here and then
there was another w here back in $MONTH 2015 2016 but i'm thinking of october
2014 is another example of a sharp super-sharp v-shaped rally you remember
back in October 2014 it went down market went down and i think was a china and
oil back then were the big concerns and then I went right back up super fast
super sharp
the shape rally and you know it
for example if if you had if somebody had bought you know puts or put spreads
here or had shorted the market that they you know it just floated up word for a
while and yes it did come back down but still this this would have been too
early
so after a super-sharp v-shaped rally justjust wait a little bit wait a couple
weeks before you before you short the market and then you can enjoy our at
least you you probably won't have to deal with time decay because after a
rally like that it
yeah the market does tend to either go sideways or sideways with a slight
upward floating upward drift for a little while before it dips again
because it's got that balance that momentum
w shaped rallies are a slightly different animal because with the w you
get more of a wobble and so you get that upward drift but then it tends to you
know it it as you can see in this example yet it went up but then it did
wobbled and then went right back down another W shape
alright float upward for a while and then right into the right into the
brexit scare there so anyway there's a little tip for you and that's some
advice that i'm going to try to take my take a little more seriously myself just
to help me time the market a little better
it's impossible the time the markets perfectly in my opinion but i'm always
tweaking i'm always adjusting and trying to get better at this and you know I
hope you're trying to improve everyday as well so if you like some more help
with this and with the you know just the markets in general and putting together
a trading plan by all means please contact me my email address is David
Modell @ gmail.com
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thank you so much and I really hope to hear from you soon