shaun Rosenberg

Why trade directional During Volatile times?

Trading directionally can be very profitable when the markets are trending.  When they aren’t trending, well directional trading can be a huge headache.

Trading directionally can be very profitable when the markets are trending.  When they aren’t trending, well directional trading can be a huge headache.

I have noticed that trying to catch the short term swings when the market is acting crazy is not necessary the smartest thing to do.   You could get stopped out early or have the stock go in your favor 1 day and then suddenly reverse on you the next day.

The reason trading directional can be hard at times is because the market doesn’t even know what it wants to do.  Stocks may be up huge one day and give it all back the next day.  Trying to run back and forth between the two can definitely be stressful. 

So my strategy is, why try to go crazy trying to catch a big move?  Instead why not take advantage of some market neutral strategies such as the iron condor, diagonal spread, or maybe just a simple credit spread?

You aren’t shooting for a home run with these strategies but it is nice to make some income while I am waiting for the markets to make up their mind.   Instead of worrying about how to trade a market that isn’t going anywhere it is much easier for me to sell some far out of the money options and let those options expire as the market starts to make up its mind.

Another strategy that I like to do is sell some out of the money puts to possibly get into some value stocks or ETFs.  But that strategy is only done with money I want to tie up for the long term.

Basically Volatile markets are different then a trending market.  If you are losing money trying to trade directionally right now, maybe think about changing your strategy during these markets.

For more information about option selling visit http://www.stocks-simplified.com/option_selling.html

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