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How to Profit from a Market Drop
Apr 26, 2019 | Eq: Total Market

How to Profit from a Market Drop

(New York)

The market is right around all time highs and economic and earnings figures are healthy, all signs that the market is headed higher. That said, prices could take a dip at any time and many are worried about a reversal. Some are particularly worried about funds having to sell stocks to rebalance their holdings of equities versus bonds (which have performed poorly of late). So how can one profit from a market fall? Here is a good options strategy for doing so: buy S&P 500 put options at $287 and simultaneously sell $285 put options, both of which expire May 3rd. The market volatility has been low, so the options are cheap, and the spread strategy limits losses.


FINSUM: If you are just playing for volatility based on a likely rough month-end rebalancing, then this could be a good strategy.

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