Make money with a new COA in a down market!

    Every time a bears market comes around people get worried.  They do
because the stocks bought made money when the markets were good and now markets are down.  Maybe a new Course Of Action (COA) is in order here.  When the markets go down many market professionals make a ton of money with a new COA or new investment technique.  Today I will teach you a new COA or technique that can be used to make money while the market is heading south.  So get ready to ride the market all the way to the bank with us and profits!

    Here we will keep it simple and use no technical terms:

*  Buying a put;  Lets say you buy a put for a stock.  The transaction is

for you to buy the opportunity to sell a stock at a given price & date into

the future.  That way if the stock’s price drops one additional thing that happens is that your contract price paid for the put goes up.  For example, if you bought a put with a strike price of $50 on a stock for

$1 contract you could make money while the stock goes below $50;  the put itself or the contract price increases as the stock goes down.  It does because the issuer of the contract sees now that you reserved the right to sell the stock at a certain (higher) price that where it dropped to now (sometime in the future but before the expiration date).

    Lets say the price you pay for the contract is $1.  It must be multiplied by 100 because put options contracts are always for the right to work with a block of 100 shares of the stock.  Therefore, cash out is $100 ( $1 x 100 shares).  Basically, by keeping the price around a dollar per contract with the output of $100 you are buying rights to shares for the put price of the contract, in this case about a dollar per share.

    Lets say the price of the share now goes to $40.  You multiply the 10 because the drop was $10 below $50, and if you bought one contract, by 100 shares, and that equals $1000.  Now take away your initial cash output of $100 and your profit is $900.  All great as long as it takes place before the expiration date.  Finally, you must get out before the expiration date in order to cash in your profits.  It is always prudent not to wait contemplating the possible bigger profit because you think the stock price will drop more.  Take your profits quickly and take them to the bank!  

Editor, AA Financial Freedom

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