Make money by trading in a recession. David Jaffee with BestStockStrategy.com
and in this video you are going to learn how to consistently earn
money in all trading environments. In December 2019 in January 2020 the stock
market was going up virtually every single day I'm sure that many people
were bragging about buying calls and Tesla and making a tremendous amount of
money the problem with these situations is that the market has a tendency to
take the stairs up but jump out the window on the way down and we saw this
in late February in March of 2020 where the market is now down 20% off its highs
and officially the bull market is dead the best way to protect yourself and to
make money consistently in the market is to be patient and disciplined in January
and February of 2020 when volatility was extremely low and the VIX was trading at
about 12 or 13 we were entering trades very infrequently we were only making
about one to two trades every single week and because the VIX was very low we
were entering all trades as vertical credit spreads by entering your trades
is a vertical credit spread you are inherently protected because it is a
defined risk trade additionally because we did not enter too many trades we had
about 70 to 80 percent of our account available as buying power so the most
important thing is that you always have to be patient and disciplined ignore all
the other people who are telling you that they're making money by buying call
options by day trading by trading penny stocks by trading Forex because over
time every single one of those people are going to lose money day trading
trading penny stocks trading forex buying options has an expected outcome
which is negative and it's only a matter of time where you're going to lose money
by doing that the best way to make money consistently is by selling
some premium however when the market corrects 20% off of its all-time high
and it does so extremely violently like it did in late February and March of
2020 the best way to protect yourself is to make sure that you trade vertical
credit spreads now I made a big mistake during the first week of March of 2020
what I did was I rolled the vertical credit spreads to naked options when
Lockheed Martin fell to around 380 and the market went up two days in a row I
thought that the market had stabilized so what I did was I rolled that vertical
credit spread into a naked position and then I ended up losing money this past
week these losses are probably going to cost me around two months worth of
trading so it's not the end of the world but at the same time I did make a
mistake previously I thought that I would make money from this sell-off and
I was positioned extremely well where I would make money however this past week
I did close out the position in Lockheed Martin I did not want to hold on to the
position over the weekend and as a result there was an extremely high
probability that this upcoming week I will reset the position but I did make a
mistake by rolling from a spread to a naked option to early the advantage of
trading vertical credit spreads during low volatility times is that it protects
you against large sell offs and volatility expansions however when you
roll a vertical credit spread to a naked position you had better make sure that
the market has stabilized and this was a mistake that I made if I had another
opportunity I would have simply rolled the vertical credit spread forward I
would have waited for the market to provide me with increased assurance that
it had stabilized so for example I would have simply kept the Lockheed Martin
trade as a vertical credit spread it was twenty two and a half dollars wide I
could have rolled the 407.5 short put to a strike price of around
$402.5 I could have then rolled the 385 long put to a strike of
380 so I would have maintained the same $22.50 wide credit
spread I would have been able to receive a credit for that role and then when the
market had provided me with increased assurance that it had stabilized I could
have been at that time only rolled it to a naked option with the strike price of
around three hundred and fifty and I would have been able to roll it for a
credit so remember in this situation we win virtually every single one of our
trades the only way that we lose money is during a situation where the market
has an extremely violent sell-off and it also has a very large volatility
expansion during this situation you want to make sure that you always maintain
adequate buying power by leaving adequate buying power you are not going
to make as much money as those people who are buying call options during a
bull market however on the flip side you will be substantially protected from a
violent sell-off and you will actually make money from these situations once
volatility contracts as opposed to losing money so remember if you want to
be consistently profitable in all market environments you have to learn how to be
patient you have to learn how to be disciplined now even myself who in 2019
had zero losing trades the entire year during the first week of March I rolled
too early and by rolling too early that is going to cost me about one or two
months worth of profits so again remember when you trade you are not
guaranteed to always make money and even though we win virtually 100% of our
trades you have to make sure that at all times you protect yourself against a
violent sell-off and a large volatility expansion like we have experienced over
the past three weeks three weeks ago the VIX was trading at about thirteen or
fourteen recently this past week the VIX hit a high
about 76 or 77 I believe that right now as of March 14th 2020 the VIX is
currently trading at about 65 or 66 remember we do not want to gamble you
are an investor you are not a gambler again you are an investor you are not a
gambler and the best way to consistently make money in all market environments is
to trade spreads during low Ivy environments to be extremely patient and
extremely disciplined when entering new trades to make sure that you're okay
with for going to or 3 or 5 percent returns so that you can actually make
money during a huge market sell-off as opposed to always playing defense and
losing money during large market sell offs now there should not be an
expectation of perfection even myself I rolled too early and that is going to
cost me one or two months worth of profits however even losing one or two
months worth of profits allows me to substantially outperform the overall
stock market so to recap you have to make sure that you're patient and
disciplined you have to make sure that you only trade vertical credit spreads
during low IV environments you then have to wait for the market to stabilize and
then and only at that time when the market has provided you with adequate
clues that it has stabilized should you at that time roll your vertical credit
spread to a naked position now there are some other things that you can do for
example if you had a twenty two and a half dollar wide vertical credit spread
in something like Lockheed Martin and you wanted to substantially reduce the
short puts right instead of having a twenty two and a half dollar wide credit
spread you could potentially roll it forward in time by about two or three
weeks to a twenty five dollar wide credit spread as a result your maximum
loss will increase from twenty two and a half dollars to twenty five dollars then
by expanding your maximum loss by only two dollars and fifty cents from twenty
two and a half dollars to twenty five dollars at that time you might be able
to then reduce your short put strike from 407 and a half all the way down to
around 360 in that situation you would sell the 360 put and then you would buy
the 335 put at that time once the market provides you with adequate clues that it
has stabilized you can then roll that vertical credit
spread with a 360 by 335 vertical credit spread all the way down to a naked
position with a strike price of around three hundred and thirty dollars
David Jaffee with BestStockStrategy.com you can visit BestStockStrategy.com
if you want the absolute best information on how to be consistently
profitable in all market environments remember this is not complicated we win
virtually 100% of our trades and the best way of doing that is by being
patient being disciplined trading vertical credit spreads making sure that
at all times you always maintain adequate buying power taking advantage
of high IV environments and only selling naked options when you're positive that
the market has already stabilized and by adequately rolling and managing your
positions so that you give yourself enough time for your trades to be right
additionally if the market continues to sell-off we will begin selling the
rallies by selling call credit spreads during days that the market rebounds
this is one of the best strategies that you can implement and this is the best
way that you can be consistently profitable in all market environments
leave a comment below and let me know your thoughts also leave a comment and
let me know if you have any questions about being profitable during a violent
sell-off David Jaffee with BestStockStrategy.com remember you must be
disciplined and you must be patient you can easily earn anywhere from 30 to 40
percent every single year while also winning virtually every single one of
your trades however the real enemy is you you are your own worst enemy if you
do not patiently and with discipline only enter the best trades if you decide
that you want to get greedy and you want to buy options and you want to try to
hit homeruns then I guarantee you that you are going
to lose money you have to make sure that you only enter the best trades you trade
vertical credit spreads especially in low IV environments you wait for the
market to stabilize and then you can take your
credit spreads and rolled up position to a naked option and you also have to make
sure that you maintain and leave adequate buying power in your account so
that you can make sure that you withstand these violent sell offs along
with a large volatility expansion where the VIX expands about five or six times
again David Jaffee with BestStockStrategy.com and this is how you can
trade and be profitable and become a consistently profitable investor in
every single market environment