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Hi Sean. With the market looking so precarious is it a good time to consider a put on a broad market ETF?
Just realize that puts are speculative and trying to call a top on a market is the most speculative move you can make.
When are puts best used? After rallies higher within established downtrends, intead of top-calling uptrends which can never really be done purposefully.
Its burned into my memory. I think I’ve seen this answer at least 3 times now. 🙂 Nice graphic
Yep. I saved the graph because people ask that same question over and over again. There’s always a propensity to try to call a market top or market bottom…even among my own subscribers.
I’ve got it burned in too now…and I wasn’t even thinking of doing one! Love it! Haha!
Yeah, top-picking is the most risky speculation one could try to do.
People want to try to pick the top, but one thing they also don’t realize is let’s say an asset was topping at $60 per share and dropped to $40.
Or…let’s say that the downtrend is in effect and went from $40 down to $20….that’s a lot bigger % drop at a lower price that it was at the absolute highest price.
Buying long-dated puts near the money after rallies higher within an established downtrend is much smarter than trying to pick a top in an uptrend.
Red arrows are examples of when puts could be bought in a downtrend. I just picked a random asset that I knew had been in a downtrend.
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