The uncertainty caused by Trump’s tariffs has left the stock market, traders, and investors reeling. In just a few sessions, the VIX has shot up by 300%. You can cut the fear with a butter knife. But those who were prepared for this moment are not losing money. They are making money. How? The key is to buy and sell option puts.
Yes, that may sound far-fetched since we are in terror-mode right now. But no matter what the stock market is doing, it provides trade opportunities each day. Some days are better than others, of course. There are a few times every year when you can really make the big money, and we are in the middle of one right now.
I have made a lot of money trading in highly volatile markets. The time to buy and sell option puts is never telegraphed, and I don’t try to time it exactly right. There is always a nice payoff when I am ready for it. Am I lucky? Sure, but luck is defined as where preparation meets opportunity.
Why you need to buy and sell option puts right now
By buying and selling option puts, you are doing two things: protecting your portfolio from volatility and making money.
Historically, markets rise up over the long term, so you might think buying puts is a waste of money. Sure, but so is buying car insurance if you never need it. And everyone needs insurance to protect their portfolios right now.
You can’t buy puts and just hold onto them. You also need to sell those puts when you have a nice profit, even if it’s small.
Having some puts in place (along with a lot of cash) blunts the impact of everyone selling and running to the exits. And when buyers step back, in you’ll be ready to participate.
Remember, this is a game of survival. Do your best to make it to the next day without doing too much damage to your accounts.
