Is This A Bounce...or Something More?

The current environment is for traders only. We are starting to see indications things might be picking up. Sometimes, the short term bounce turns into the long term move. Sometimes it doesnt. So stay tuned. And check the hotline for updates, as its updated every few days. Its a toll free call and available -. Remember that the market is currently on defense, so the name of the game right now is... Principal Preservation! Whats on my list of things to do right now is to have a shopping list ready to go. When we go back on offense, its no time for dawdling. Im finalizing this shopping list right now. In a retirement account, like a k, a deferred comp plan or b account, the current order is safety-safety-safety. That will change as soon as the light changes to green. Outside of a retirement account, there is an easy way to dip a toe in the pool, which is about all we SHOULD do now. Buying the deep in-the-money calls is a way to get the big toe wet. Whats a deep in-the-money call? As an example XYZ stock is trading at $. A deep in-the-money call would be calls with a strike price of $, or say $. The $ calls should be priced around $, plus a premium for the amount of time left until expiration. By getting in with $ instead of $, we keep more money on the sidelines, which is exactly what we want to do in defensive times. And you can get a lot of mileage by only investing small amounts in this approach and keeping the bulk of your assets in cash, out of harms way. But it HAS to be deep in-the-money calls. Speculators will buy calls at (or sometimes, even above!) where the stock is trading. For example, if XYZ stock is trading at $, theyd buy the calls. This is because theyre usually the cheapest priced options. This is NOT what we want! Deep in-the-money calls can often move in tandem with the underlying stock. Sometimes they will match, point for point, the move in the stock. Let me explain why this really matters. Subconsciously, when many folks buy a stock, they think theyll own that stock for a long time. But were on defense. So we may need to exit an idea quickly. If this happens, and we are holding a stock, we might hesitate about selling. Our subconscious may be telling us to hang in there. Bad! In bull markets, you can hang in there. In a bear market (like now), there is no TIME for us to hang in there. Its either working, or its not. Now, if we own a call option (and not a stock) we may be less inclined to hang in there like we could with a stock. Because if the stock drops to (or below) the strike price of the calls, the calls will be worthless. This is essentially the same result wed get if we were stopped out on a stock. We need to take this kind of protective approach today because we dont know when the market will be going back on offense. Yes, calls are options. Options can destroy accounts when they are used improperly. shares buyers should buy only call. shares, calls. Problems come along when someone who normally buys shares decides to buy calls (which is the equivalent of buying shares of stock). So theyre not for everyone. And, like driving a car (or most other things in life), if you dont know what you are doing... You Can Get REALLY Hurt! But using deep in-the-money calls can create a scenario where you can invest in several different ideas, all at the same time, with far less dollars than buying the actual stocks. Regards, PS Now you know why Im busy preparing my shopping list! Thats my job. Now, your job is to keep coming up with these great questions I continue to get. So continue to email and call. And check the hotline. Back in a few days with another update.