It's still possible to grow your portfolio
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Bernie Schaeffer Schaeffers Research.com |
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The stock market gets no respect these days.
On July 27, an article entitled "Ten Stock Market Myths That Just Won't Die" was featured in The Wall Street Journal. It attempted to debunk just about every reason your broker has ever given you for investing in stocks – from "investing in the stock market lets you participate in the growth of the economy," to "the market is really cheap right now," to "stocks outperform over the long term." Overall, it adopted a very cynical, negative view of the market.
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If this article, which ends with the comment "In the long run, we are all dead," is your idea of helpful investment advice, then please read no further. But at the same time, if you're expecting me to try to "debunk the debunker" by giving you 10 reasons to be bullish on the market, then I have a surprise for you. While I do feel that the unprecedented rush to the exits by individual investors and the extremely negative press that has dogged this market since early 2009 will ultimately prove to be very effective contrarian indicators, I understand the frustrations investors feel with the post-"flash crash" market in all its high-volatility, directionless glory.
Instead, my message to you is about avoiding these stock market frustrations and actually setting yourself up to make some money. I'm sure you understand this will not happen by you sitting in cash vehicles that guarantee you safety but pay you no return. You are being "rewarded" for the risk you are taking, and that reward is zero. But at the same time I'm not suggesting that your only alternative is putting your money in the market. What I'm in fact suggesting is that you commit a relatively modest portion of your capital to STRATEGIES designed to EXTRACT MONEY from the market, regardless of direction, or even if there is NO direction. And the only investment vehicle that can accomplish this for you is options.
So in the format of the aforementioned Wall Street Journal article, but with the goal of providing you with actionable information designed to grow your portfolio, allow me to list for you 10 reasons why you should be trading options right here and now.
- The calls in your options portfolio will allow you to achieve big leveraged gains if the market catches most investors by surprise and rallies through year-end.
- The puts in your options portfolio will protect you against "flash crashes" and other disruptive market events and even allow you to profit in these situations.
- You can still benefit from the unlimited profit potential of option buying yet limit your loss from any trade to 20-30%.
- You can profit from market volatility regardless of the direction of the price movement.
- You can profit from buying calls on stocks that outperform, and at the same time buying puts on stocks that underperform their industry peers.
- You can achieve huge leveraged gains by buying options during expiration week, when premiums are extremely low. And now, with the new Weekly Options, there is an expiration week every week.
- You can profit from the strong tendency of the market to trade in well-defined ranges most of the time with a carefully selected option premium selling program.
- You can profit from the huge volatility around events like quarterly earnings reports.
- You can profit by buying call options on stocks that are in long-term uptrends at much lower dollar risk than buying the stock.
- You can profit in all market environments by trading multiple option strategies on highly-liquid exchange-traded funds on broad-market indexes, like the QQQQ. In the long run we may all be dead, but we can make the most of the short run by looking to the options market for our trading opportunities.
A good place for you to start might be our Options Center, where every trading day we slice and dice what's happening in the options market and its implications and where you can also find a wealth of options-based tools and filters and explanations of various options strategies.
Bernie Schaeffer will be available to take your questions until Wednesday, August 25. Please use the form below to submit your questions.
Bernie Schaeffer:
• Developed Expectational Analysis®, a proprietary, three-tiered method of options analysis combining technical and fundamental studies with the analysis of investor sentiment.
Publisher
• In 1981, Bernie launched the newsletter, Bernie Schaeffer’s Option Advisor. Serving as senior editor since inception, Bernie has led the Option Advisor to become the nation’s leading options newsletter. Features: market commentary, specific trade recommendations, and trading strategy.
• Launched SchaeffersResearch.com, in 1997. A four-time winner of Forbes “Best of the Web” award, the website has also received positive mention in Barron’s, AAII and The Wall Street Journal Guide to Online Investing - “An independent options site that is one of the best for providing primers for both novice and advanced investors.” Features tools, quotes, data, commentary, and education.
• 10 Days to Successful Options TradingSM – This multi-media home study program teaches options basics. Learn fundamental strategies with hands-on application exercises and examples.
Author
• The Option Advisor: Wealth-Building Techniques Using Equity and Index Options (1997)
• New Thinking in Technical Analysis: Trading Models from the Masters – The industry has viewed Bernie’s Expectational Analysis® methodology as a groundbreaking approach to trading. Proof of this came with the publication of this new book by Bloomberg Press. One of twelve authors, Bernie was honored to be chosen from hundreds of market analysts to explain his methodology.
• Writes a monthly options column for Bloomberg Personal Finance magazine.
• Multexinvestor.com regularly calls on Bernie to contribute to their “Analyst Corner.”
Awards and Recognition
• Three time winner of The Wall Street Journal stock picking contest.
• Ranks fifth among market timers tracked by Timer Digest for the past decade.
• Dick Davis Hall of Fame inductee for his bearish posture ahead of the 1987 crash.
• He is known for successfully maintaining a bullish market posture throughout the 1990s.
• The Market Technician’s Association (MTA) awarded Bernie “Best of the Best” in 1997 in the field of Sentiment/Psychological Analysis.
• Bernie is regularly featured on investment chats on Yahoo! Finance.
• Bernie’s views on the stock market and the economy are regularly quoted in The Wall Street Journal, The New York Times, BusinessWeek, Investor’s Business Daily, and USA Today.
• Both Barron’s and The New York Times have featured Bernie in “Question & Answer” interviews.
• Recognized as a CNBC “Market Maven.”
• Appears regularly on national financial broadcasts such as CNBC, CNN, Bloomberg Television, the Nightly Business Report, Wall Street Week with Fortune and Fox News. Also serves as a guest host on CNNfn.
• Frequently invited to speak at national investment conferences and seminars.
• Regularly sits on Options Industry Council panels around the country.
• One of 50 market strategists appearing in BusinessWeek’s 2001 market forecast.
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