Stand Firm as They Run: How to Profit Off Falling Markets
The whole stock market is falling. The Dow is down 12% off its January highs, the S&P 500 is down 16%, and the Nasdaq, which once ruled the stock market, is down 26%.
It’s ugly out there, but I’m still playing the markets – and you should be, too.
Bull or bear market, there are plenty of ways to turn a profit in the stock market. While others, fearful of the downward trend, run for the hills, you can set in motion two profitable plays (one of which could yield a 100% gain).
05/10/2022 Take It to the Bank Tuesday Transcript
Hey everybody! Shah Gilani coming to you with your Take It to the Bank Tuesday, where I recommend what you should do with $100 today – as in right now.
Guess what’s happening? Oh, we don’t need to guess. All you have to do is look at any benchmark, any index – they’re all down. It’s ugly, so people have asked me: What would I do with $100 if I wanted to bet on the markets going lower?
Oh, I’ve got something for you: inverse ETFs. These will pretty much work the opposite of a regular ETF. In other words, an inverse ETF of a benchmark will rise as the benchmark itself falls.
Let’s take the Dow as an example. Media outlets, instead of financial media outlets, refer to it simply as the Dow, but it’s really the Dow Jones Industrial Average – it’s the average of 30 stocks. It goes up and we know the market has gone up because it’s a measure of the market. The reverse is true when it falls.
Now, it’s Monday as I’m recording this. The Dow is down 1.5%. Not a great day for the Dow here on Monday, but come Tuesday, we don’t know where it’s going to go. We don’t know where it’s gonna go Friday or next week or the week after.
But, a lot of you think the markets are going lower, so…
Proshares Short Dow30 (DOG) is an inverse ETF of the Dow Jones Industrial Average. It’s not leveraged, meaning if the Dow goes up 1%, DOG will go down 1%. If the Dow drops 5%, the DOG will go up 5%.
If you want to put $100 betting the market’s going to continue downward, then you buy DOG. That’s what I would do.
If you want to hedge, you want to buy more than $100-worth. A lot of people are doing this. They’re investing in inverse ETFs as a way to make money on the way down, or as a way to hedge their stocks if they don’t sell them.
I say put $100 on DOG. It’s trading right now around $34.75 and I think it can go up. As the Dow continues down, I think we can easily get to $35, $36, maybe $37.
I don’t think the markets are done going down.
The only problem you have with DOG, or any inverse fund (especially leveraged funds), is that they are repriced every day. That creates oddities and anomalies. Suffice it to say, it doesn’t track 100% the way it should, or that you would expect to see.
Inverse funds are good for a short-term hold. If you want to hold them from longer, it’s because you think you’re gonna get consistent momentum in the direction you expect. In other words, if you think the Dow can consistently drop, drop, drop, then you want to buy $100-worth of DOG. I think it could go to $40, which would give you a 15% gain. If you buy in right around $34.75, that’s what I would do with by $100.
But there’s something else you can do with your $100 this week. I’m talking options.
That’s deep for some of you. If you understand options, guess what? You can buy a call option on DOG – I suggest DOG June 17, 2022 $35 Call.
I think you could buy ’em for about a buck. So, one contract would cost you $100. Now you are at greater risk here because I don’t like putting stops on my options play. So, you are risking your $100 if the Dow soars – you’re probably gonna lose your $100.
But, if the Dow goes down and, by June 17, DOG is above $36 and you bought the DOG June 17, 2022 $35 Call, you could make a 100% gain.
DO, with your $100, buy up DOG or throw down the towel and buy the DOG June 17, 2022 $35 Calls. That’s what we live for, baby. To swing and take it to the bank.
Catch you next week.