Profiting from pull-backs within the market is no different from buying real estate when prices drop. The markets however offer vehicles that we can trade along side the S&P500 when the economy is shaky and volatility awakens. I tend to enjoy trading the Volatility (fear) index – $VXX along with the $SPY. Although a very advanced stock trading concept, trading correlations is can be very profitable. To reduce trading risk, trading buying CALL OPTIONS and PUT OPTIONS is in my opinion an effective way to trade in these situations.
The following live trading video demonstrates exactly how I correlate the two.
Have questions about the markets? Contact Professional Stock Trading Coach Kevin Michaels!