Home > Finance and Stocks > A rocky ride on Wall Street. Stay Calm

A rocky ride on Wall Street. Stay Calm

So lately we’ve seen lots of volatility. Some fund managers are freaking out on an hourly basis and going with the tides.  As usual these managers  (95% plus over 10 year periods) will all lose to the index.  Playing the volatility game is a losing strategy.  The only way to use it to your advantage is to set target prices where you will buy or add to your positions and build them out.  As a long term investor and holder of equities I’m always looking to add when bargains become present.

My favorite strategy is to write naked puts.  Typically when volatility is up high I would write a put with a strike about 10% to 20% out of the money and collect the premium.  I only do this for stocks I would buy even at today’s prices but instead hedge myself with the put.  I get put the stock at a much lower price and further reduce my cost with the premium received.  In the worse case scenario I don’t get the stock and keep all the premium for 100% gain on premium received.

This strategy requires you to have buying discipline but keeps you in the game making money through the turmoil.  It’s helped me pick up some great deals and also helped in my entry points while padding the portfolio with free premium.  Give it a try why the volatility and panic run high.

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