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Market crash, how to make money?


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Market crash, how to make money?

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  #1 (permalink)
 Deetee 
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Hello fellow traders,

Is there a market crash coming up? Gosh, I wish I knew.

How would you invest let's say EUR 20.000 to take advantage of a market crash?


In the past months I have been thinking how to play some mid or longer term trades anticipating on prices going down significantly. But I'm not sure.

Some options I'm familiar with:
* Take a short position on one of the index futures, like (M)ES or (M)NQ
* Buying put options
* Selling call options
* Shorting stock
* ...

What would you add to this list?

This well written article gives something to think about:
https://www.gmo.com/americas/research-library/entering-the-superbubbles-final-act/
(I got to this GMO article via this article:
https://markets.businessinsider.com/news/stocks/big-short-michael-burry-stock-market-bubble-crash-twitter-spx-2022-9)

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 syswizard 
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Deetee View Post
Hello fellow traders,

Is there a market crash coming up? Gosh, I wish I knew.

In the past months I have been thinking how to play some mid or longer term trades anticipating on prices going down significantly. But I'm not sure.

Buy long dated PUT options on SPY and/or QQQ. Normally you would put on a bear spread, but that would limit your profits in a crash scenario.
Remember: timing is everything with options....as premium decay could kill your trade if your timing is off by a few months.

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 blackgrey45 
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Short the MES then buy large cap tech after the market goes down 30% as a value play.

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 bobwest 
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Well, the first thing is that you need to know if it's actually going to happen.

Not to make light of the article you mentioned, but predictions of a stock crash come up kind of often. True, sometimes markets do crash, but the predictions are a lot more common than the actual events. Big market movements are about as hard to predict as any others, but for some reason people do sometimes try.

But any of the possible ways to exploit it that you mentioned, if it comes, would probably work.

Probably the best is the simplest, to just short a bunch of stock. Why? Because in a true market disaster, you can't necessarily be sure you know what sort of liquidity there will be afterward -- meaning, whether you will be able to get anything out of any positions you have. The question would be, how deep a crash would you expect? The end of civilization, or just a normal bear market? If you only envision a normal, but large, decline, then the usual shorting choices are probably fine. If the world ends, then maybe not.

With that said, I think this is not likely something that anyone is going to be able to predict in an accurate and timely way. Also, just be aware of the perma-bears who are always predicting a big crash. Maybe it will be this time, but maybe not, once again.

Good luck. I frankly would not worry much about it. But I have certainly been wrong before, too.

Bob.

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 Deetee 
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Thanks for your input. Indeed, timing is extremely difficult and you never know what is going to happen, like any other day. And who is writing those articles and what are the intensions of that person. Other articles probably state that new all time highs are coming soon.

With buying/selling options, at some point you run out of time. With a future or shorting stock you can sit and wait till it happens, if ever. And when to take your loss?

Everything is uncertain, like any other day.

@bobwest , when you say "I frankly would not worry much about it", why is that? is that because you don't think prices will go down much? Or not to have emotions be the base of trades? Or ...?

Thanks
Deetee

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 GFIs1 
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Hi @Deetee

The world markets have seen the highs of the year - before Summer. Now it is time to get back to the real economics.

Therefore I want to elaborate the trend on economic facts:
Interest rates are no longer negative...
but are rising quickly
National Banks are reacting partly very harsh on actual world situation
Banking is no longer a heavy weight - is moving to online support - shrinking customer service and omitting personnel more and more
energy costs are exploding - instability for winter time foreseeable. A Swiss steel company pays now for electricity a yearly amount for ONE month actually...
People are shocked on gas prices, transport costs, rising pricies for food and living costs
Transport interruptions, blocked supply chains, no longer having prodution within own country etc. result in extra costs and no longer predictable deliveries
International world wide connected markets are no longer sure how long this works further as war, inflation etc. are working against
Recession IS here - despite some economists (US) do not accept it for now
World markets are falling apart as many countries are no longer open for free markets

Conclusion
This economic drive back is not to stop easily and at least will not turn up within half a year. So the companies get under pressure from many sides (material, energy, transport, clients etc.) and are facing a getting out of the market.
Governments are supporting on all levels - spending printed money for all needs. But face to push inflation into the sky.
Also to mention climate change which makes pressure to omit fossil energy quickly. Facing high water floods, hot and dry summers, less food production when water is missing, burning forests around the world etc..
To sum it up - there is just ONE direction for the markets: DOWN!!!

How to use this information as a trader?
Make the most out of daily volatility and movements. Omitting high risks.
Put money short time (daily) into good instruments. Not stocks more into futures.

Hope this helps
GFIs1

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 giftedmd 
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One of the best ways to take advantage without worrying about the time decay of options is to buy inverted index ETFs. Value goes up when market goes down. And there are 3x leveraged versions if you like the leverage of options.

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 bobwest 
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Deetee View Post
@bobwest , when you say "I frankly would not worry much about it", why is that? is that because you don't think prices will go down much? Or not to have emotions be the base of trades? Or ...?

Thanks
Deetee

I wouldn't worry much about it because I have seen predictions of disaster again and again over the years. Yes, there have been some large and sudden declines, and there will be again. It's part of the market. But we're still here.

There are apparently always going to be predictors of doom. Since they believe in their case, sometimes passionately, they can be persuasive. But their predictions don't play out.

If the markets head down, there are normal bearish tactics to use. If it heads up, there are bullish tactics. There are always arguments to be made for either, and it could do either. I want to respond appropriately to what is happening in the present, however it goes.

Bob.

When one door closes, another opens.
-- Cervantes, Don Quixote
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 Arch 
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giftedmd View Post
One of the best ways to take advantage without worrying about the time decay of options is to buy inverted index ETFs. Value goes up when market goes down. And there are 3x leveraged versions if you like the leverage of options.

And choose a compounding inverse ETF (e.g., SPXU) than one that erodes (e.g., SH) if holding for more than a day.

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Cools81
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id buy the SP500 ETF at 3500-3600 and hold for 20 years. or if you want quicker pay day sell it at next ATH.

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