As
market is driven by emotions of fear and greed we can always count on rising and falling markets.History has shown that market does have incredible run ups (i.e. tech boom) and incredible collapses (i.e. tech crash). In big bull market of late 1990's/2000 everyone was making money until market crashed and then a lot of people gave back all their profits while others lost their shirts.
How many people do you know actually profited from crash?
We all knew it was coming, didn't we?
TIP: One of most profitable things we can do as an option trader is to buy puts in a falling market. It sounds too simple I know but often it's simplest things that can produce most profitable results.
I recently read of about a woman who bought $10,000 worth of puts on S&P 500 a week before massive stockmarket crash of 1987.
She was only a beginner to option trading but she knew enough to see that market was sky-high and that there were dark clouds on horizon.
She was quite surprised (over moon!) to get a call from her broker on following Monday saying that her puts were now worth $500,000!
As everyone was panicking, she was quietly unaware that she was making an absolute fortune! Hard to believe I know, but lesson here is that you don't have to be a rocket scientist to make money by trading options.
Now we can't go back in time and make that trade for oursleves and when it comes to crystal balls, well mine is as good as yours...but we can 'expect' that market WILL crash again (it always does) and all we need to do is to wait patiently for that turning point with our fingers on put buying trigger.
