Experience says buying puts in a hole is a “no go”

As a reminder, we trade what we see using our discipline and the insight of our proven indicators. We do not trade how we feel. This strategy has been successful in the past years to find select stocks regardless of market environment.

Stocks are down, possibly forming a technical bottom when angst reaches maximum pressure, off 15% from forever highs after a 25% jump in 2021 and a rocket rally of 100% since 2020 COVID lows. The stock market tip top was 4 short months ago when corporate earnings, the true value of stocks, were excellent, expanding earnings growth, revenue, and profit margins to lower the price-to-earnings ratio 25% (to 16 which is below the 10-year average).

Buying puts is always an option, though now the risk reward favors the longs in what is still a decade plus Bull Market. Time will tell the next direction leg of the market, and to position for success, my recent plays have used September, October, and January expiration dates to allow for development.

It may be different this time, I personally don't believe that too many jobs and dramatically rising wages are catastrophic financial concerns, but remember our trades are limited risk options and some more conservative traders use stop losses for further money management.

Lastly, it may be helpful to address the negative sentiment by spending time to physically list the macro events that the markets have overcome each and every time since 2000: the internet bubble, the financial crisis, Greece and Cyprus's debt scare, black Monday in China, Brexit, the flash crash, the inverted yield curve, falling interest rates, COVID, rising rates and now Ukraine.

Stocks have been strong for decades and have bounced back every time in market history so far…until they don't.

P.S.: If we are about to climb out of this bottom, the best path back to the top is by following the Elite Money. I recently sat down with Robin Norton to teach you all about my system for doing just that. Watch our interview here.

Best Wishes,

Elite Money Trader

HIGH RISK WARNING

Trading foreign exchange, stocks, options, or futures on margin carries a high level of risk, and may not be suitable for all investors. Before deciding to trade, you should carefully consider your objectives, financial situation, needs and level of experience. Classified Intelligence Brief provides general advice that does not take into account your objectives, financial situation or needs. The content of this website must not be construed as personal advice. The possibility exists that you could sustain a loss in excess of your deposited funds and therefore, you should not speculate with capital that you cannot afford to lose. You should be aware of all the risks associated with trading on margin. You should seek advice from an independent financial advisor. Past performance is not necessarily indicative of future success.

Experience says buying puts in a hole is a “no go”

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