Hey Stock Fans!
Well, for those of you who haven’t heard, I am suspending my personal trading and have closed out all positions due to the impending arrival of my new baby girl, Grace, who will be arriving any day now. I don’t trade around big life events as it has been my experience both personally and observing other traders that it can lead to disaster. Stress is a huge factor in poor decision making and can lead to tragedy in stock option trading or select the next big momentum stock for online stock trading.
That said, there are some big developments taking place but before I get into that I wanted to respond to some questions I have been getting lately. Mainly, with all the volatility in the market sending the indices up and down ad nauseum if there are any safer alternatives for more moderate traders. I can respect the position as there are some traders with less experience who don’t necessarily know how to trade in volatile markets with option trading or trading stocks. So what safer options does one have?
Fortunately, there are ETF’s or Exchange Traded Funds which are baskets of stocks within a given niche that act as its own index. The major benefit is that it allows the trader to intelligently speculate on a sector of the stock market while reducing the volatility of owning an individual stock within that same sector. This is extremely beneficial as these ETF’s tend to trend much better without huge spikes or crashes in price.
The reason this is important for someone looking to lower there risk while putting themselves in the best position for a strong run within a sector. As fears of the subprime market begin to grow and evidence of the damage becomes more apparent in form of reduce jobs in the market, house supplies growing, home prices falling, etc. you can expect more companies to report bad earnings. Once the bad earnings reports are released or expectations for the next quarter turns sour you can expect alot of companies stock prices to implode and lose 30% to 50% or greater of there share price virtually instantly!
There are numerous ETFs to choose from and the great news is that almost all of them are carry options so that means that stock option traders can take advantage of the reduced volatility while lowering there risk even more using options on ETFs. You can even choose ETFs that are “short” ETFs on a given sector where available. The major benefit there is that you can now short the market in your IRA (Individual Retirement Account) as ETFs are approved for IRA investments!
Check out ETFs today and play with the charts and I think you will find a place for these unique and versatile instruments in your trading arsenal.
Good Trading,
Billy
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