Hey guys, I thought this might be fun and helpful to many of us ET options traders hoping to be the next John Paulson but not thinking about a particular move. I'm guessing many of us believe a market correction at the very least is in the near future. Even if the Fed will not allow a full out bear market to happen any time soon, I believe a 10%-15% correction is probably very likely in 2020 and possibly even in Q1. So what is your top play (or even better your top few plays) to capitalize big on a correction? Also maybe you could let us know if it is a trade you have already put into motion or if you are waiting for a certain catalyst before doing so, along with any other details. I have some that I have put into motion (which I will share), but I would love to hear about some more option plays and even feedback or criticism on mine. I know I am new here, but I am looking forward to becoming part of the community and would really appreciate anyone who participates in this thread, I think it could be beneficial for a lot of people to learn some new stratagies that they can potentially put into motion if they feel a correction is on the horizon. Thank you in advance, and here is one of mine to start: Ok, so I have been doing a little TA on ProShares Ultra Pro Short ETFs for both the S&P 500 and the Nasdaq so far. Essentially these funds seek daily investment results that correspond to 3X the inverse of the daily performance of the S&P 500 and Nasdaq. So in this play you would buy out of the money calls rather than puts. I attached some analysis that I put together that shows corrections in the S&P and Nasdaq over the past couple years, and how the ETF performs during the same time period. They are approximately -5%, -7.5%, -10% and -15% corrections in the Index. I noticed that the correlation for how much the ETF gains in comparison to how much the Index loses seems to be closer at larger corrections. Take a look and feel free to let me know any feedback. Thanks guys, I look forward to your feedback and to hopefully getting some activity moving on this thread and some more strategies. PS: I also did the math for some different examples at different expirations and different strike prices for SPXU to show what the profit could be at different market correction scenarios. If you are interested let me know and I would be happy to share it with you, pretty crazy how much potential some of these have if there were a 12%+ correction.
I'd be looking at puts on some of the cloud names trading at obscene multiples. A stock like Shopify at $404 per share, trading at 440x forward earnings and 33x revenue is a prime candidate. That stock will lose 90% of it's market cap if we see a bear like 2000-03 or 2007-08.
Sorry, I don't see any BIG SHORTS opportunities around the corner, not until after the election. Of course I am just an amateur retail trader, don't have a lot of insights on finance and the economy.
Awesome, thanks for the tip SteveM, that sounds promising! I will look into some of the others as well. Just curious, when would you put in the trade and how would you do it? Get in soon with a further out expiration date or wait for a turn in the market and then buy your puts with closer expirations to get more contracts for your buck? I just like to hear how others think and then weigh out the options. Thank you again for your reply.