How to LOVE market turmoil when everybody else is freaking out
Somewhere around the end of January 2018 the market started “crashing”. To make matters worse, the crypto-markets also started crashing, so there was no place to hide and lick your wounds. Even the websites of some fintech startups started crashing.
So, how on earth can anyone love it? Well, I’m here to tell you that when the market drops, you can still make money out of it.
This is the graph of SPY, an ETF that tracks the S&P 500. This is an asset that is included in most of our portfolios.
Let’s focus on one single thing, that blue line near 287.50. An algorithm drew this line, long before the market went down like a rock and you’ll see in a bit why this is important.
This line is what we call a resistance level and based on technical analysis it is where prices (usually) rebound. It is tricky to get it by (human) hand but it is *insanely* difficult to find it using non-machine-learning algorithms as the lines are not always *exactly* there.
Long story short: if you find this line, you can tell what is going to happen next.
Ok, I know what are you thinking. Knowing where the price will change direction, means I know when to sell. Right?
No. Absolutely not.
Let me introduce you to option strategies.
Using options, you can actually “buy insurance” for your assets, by paying a premium, so that whatever happens, your assets stay protected from market drops. Options can also be used to make money, by selling “insurance” and collecting the premium.
At AgentRisk, we regularly deploy option strategies either to protect assets or to increase returns. The last market drop actually enabled us to generate additional returns for our clients, without touching any of their assets. Let me highlight it in case you didn’t get what just happened:
The stock market went down and you got paid by an algorithm that recognizes objects. Welcome to the future.
There is catch of course as with all things in life.
Deploying option strategies requires a deep knowledge of how volatility works because the more volatile the market is and the longer you want your assets to be protected for, the higher the premium is.
So, it all comes down to this. I could tell you to avoid trying out these complex (and sometimes dangerous) strategies and let our algorithms do all the hard work, but I hate product pitches as much as you do. Instead, I urge you to learn more about options and ping me @jonromero with your thoughts. Or, if you are near L.A, let’s meet to geek out over their amazing power in person.
Jon V
