So much has happened in recent months: the terrorist attacks in Europe, the Brexit vote, the attempted coup d’état in Turkey. Yet in the last few weeks, Wall Street has hit new highs.
Can I ask you a question: have you gained money with this market movement? If the answer is no, do not despair, sit back, and read on.
I’ll explain how the US stock market can still give you great rewards.
Ok, let’s say that you are unfamiliar with stock investments.
The first thing you need to know is that stock market investing is not a game. You must learn how to invest, and this is a very different matter.
Many years ago, there were no full immersion courses in Italy on how to invest in the stock market. I went to the United States to follow trading courses given by the guru of the moment. Now you can save yourself the trip, because my courses in Italy incorporate everything you need to know to get started. But let’s not digress.
Even if you have not studied economics, even if you don’t have friends who work in a bank, even if you don’t follow financial news daily, you can make money with trading on the Stock Exchange. I will give you a concrete example within the reach of many, and it is composed of two elements.
The first element: in November there is a very important event, the US presidential election. Will Hillary Clinton or Donald Trump win?
The second element are options, investment tools ubiquitous in the US but also in European markets.
People who make money trading invest in options. Because options allow you to earn as much when the market moves up as when it goes down and when prices stabilize.
So how do you make money from the US election?
The surveys favor Clinton, but we don’t really care. Experts of large business say that if Hillary Clinton wins, the market will remain set positively, while the election of Donald Trump would bring confusion and negativity to the markets.
Others resort to analyzing long-term statistics to predict whether the stock markets are better or worse with the passage of delivery between leaders of the same party, or to say whether Wall Street behaves more virtuously in the years of Democratic leadership or those under the Republican leadership.
You know what I say? That it’s good to see what is filtering the results for the effects of disturbing economic trends or geopolitical problems around the world. Not that there is an important correlation between the relationship of the President and the political trend on Wall Street, especially if you look at the medium and long term.
One fact seems certain: the volatility of the US stock market, very low today, is set to rise starting the date of the presidential vote in November and it will probably continue to raise in the weeks after the election.
In other words, the market will move violently. This movement can be used both with the technique of Straddle and with the purchase of options on the VIX. Don’t be afraid of the words. It is all much simpler than it may seem. I’ll explain how it works.
BETWEEN CLINTON AND TRUMP STRADDLE WINS
About the options on the Vix I will summarize only a few concepts. The Vix, which is the index to which these options are attached, is a sort of measurement of the volatility of Wall Street. When the stock market volatility increases, the Vix also increases. So if you have bought a call option, you will earn if the market goes up. If you sell call options you make money when the market is stable, goes sideways or goes down.
A long Straddle is the technique I have already spoken about in my ebook “Trading in options.” If you have not downloaded it, you can do it from here. It involves buying a call and buying a put at the same strike price. The straddle is an option strategy that will allow you to make money if a stock index such as the S & P500 or action to which it is attached moves sharply in one direction without knowing in advance what the direction will be.
This strategy consists of the simultaneous acquisition of a put option and a call option that has the advantage of being able to be applied every time you expect a stock or a stock is exposed to significant price change.
When will you use this strategy? For example, before important news is given about a particular company or about a particular market and that’s what’s going to happen when you know the name of the winner of the election.
I do not know if the news will be good or bad, who will win Clinton or Trump, what matters to me is that this news “impacts” on the stock market! And the name of the new president of the most powerful nation in the world seems to have just what it takes to do it. And then, if you look at little or nothing, it’s very likely that you will be able to close the position with a very limited loss if not for a small gain.
I will tell you a little secret: at this time call and put options related to the S & P500 and VIX are cheap because in recent weeks Wall Street has just moved, so the volatility is low.
So we are in a doubly favorable situation. The opportunities are within your reach, but you have to develop your financial education.
I leave you with this question: are you ready to make money, or are you waiting for someone else to make it?
To Your Financial Freedom