how to profit and trade options during a recession. David Jaffee with BestStockStrategy.com
and in this video you are going to learn how to make money and profit by
trading options in a recession so one of the important things about how we trade
is that we do not trade often we are extremely disciplined and patient in
January and early February of 2020 we didn't make that many trades we
opportunistically open some trades and because of low ivy environments where
the VIX was trading below 15 we always sold spreads because we understood that
volatility could expand at any moment now during the last week of February we
saw how rapidly volatility can expand it went from about 14 to around 50 in just
about six or seven days the reason why myself and my students were protected is
because we had about 80 percent of our account as available buying power
primarily because they're just simply were not good trades to make in January
and February also because we traded spreads as the
volatility expanded and the market fell the long put option that we sold
protected our positions from substantial losses if the market enters a recession
and a recession is defined as a 20% drop then we will begin selling call options
for our existing positions a few of them are in the money what we will do is we
will wait for the market to stabilize and then we will use the lower price put
option that we purchased remember we purchase the insurance and then we will
use that premium to roll those positions into a naked option that is
substantially below the current market price until that position expires if the
market does not stabilize then we will simply roll
manage the existing spread forward in time until the market stabilizes once
the market stabilizes we will roll the spread into a naked option that expires
in one week at a price that is substantially below the current market
price and then because the market has stabilized then that position will
expire worthless again the best way to prepare and make money while trading and
investing in a bear market or in a large sell-off is by taking the necessary
preparations to avoid problems in your account by being disciplined in not
entering trades that you had no business being in in the first place I do
understand that in December 2019 in January and early February of 2020
stocks were going up at an alarming rate you are probably watching other people
make a tremendous amount of money by buying call options however you have
witnessed that in just five or six days six to twelve months worth of gains have
completely evaporated and it is extremely important that you be
disciplined because if you are not disciplined this is going to happen to
you continuously you do not want to be a self-destructive trader you do not want
to be a self-destructive person who is going to lose money also the stress that
goes along with losing money in the stock market is tremendous the pain that
you feel when you lose money is so much stronger than the happiness that you
feel when you make money as a result it is extremely important that you do
everything possible to not enter bad trades and to protect your trading
account so that when situations like this happen
you do not lose a lot of money and that you can instead use it as an opportunity
make money many people who follow tastytrade or option alpha will in my opinion
have lost a tremendous amount of money because they will have enter trays that
they never should have entered in the first place also a lot of the followers
of fake gurus who encourage you to buy options have ended up blowing up their
accounts and losing a lot of money you need to make sure that you have a
legitimate strategy in place where you can make money in all market
environments and by selling spreads in low Ivy environments and only selling
naked options when volatility is extremely high those are the
environments where you can be extremely profitable and make money when other
people are losing money David Jaffee with BestStockStrategy.com you can visit
BestStockStrategy.com enter in your email address to receive over $400 of
valuable free content please like comment share and subscribe leave a
comment below and let me know how your portfolio has done during this sell-off
I answer everyone's comments and I wish you the best of luck
in this trading environment.