There are a lot of people who think that we are going torwards another great depression. Is it true? Well know one knows what will happen for sure, but we can prepare for it. There are a number of ways to make money during a stock market crash.
In fact stock crashes have the potential to make traders much quicker gains because stocks go down faster then they go up. So, how can you make money in a stock market crash? Here are 3 strategies that can help traders profit from a falling market.
1. Short Stocks
Shorting is the process of borrowing stock and then returning it. By shorting a stock you simply borrow it from your broker and then sell it. Later on you will have to buy it back and return it to your broker. The idea is to sell stocks high and buy them back lower.
2. Put Options
Puts allow an investor to have the right to sell a given stock at a given price at some point in the future. So, if you buy a put it will increase in value and make you money as the stock goes down. This is because even though the stock is going down in value you still have the ability to sell it at the same price.
3. Selling Calls
Another type of option is called a call option. When you sell a call option you give another trader the right to buy the stock from you at a given price. For this you recieve a premium. If the stock stays below that price the call will expire worthless and you walk away with the free premium.
The downside to this is that the stock could potentially shoot up to infinity. So your risk is unlimited. To get around that you have to buy another call option at a higher strike price to limit your risk. For example if you sell the $40 call you can also buy the $45 call. This would limit your risk to $5 and you could still make money from the difference between the two stocks. - 31970
In fact stock crashes have the potential to make traders much quicker gains because stocks go down faster then they go up. So, how can you make money in a stock market crash? Here are 3 strategies that can help traders profit from a falling market.
1. Short Stocks
Shorting is the process of borrowing stock and then returning it. By shorting a stock you simply borrow it from your broker and then sell it. Later on you will have to buy it back and return it to your broker. The idea is to sell stocks high and buy them back lower.
2. Put Options
Puts allow an investor to have the right to sell a given stock at a given price at some point in the future. So, if you buy a put it will increase in value and make you money as the stock goes down. This is because even though the stock is going down in value you still have the ability to sell it at the same price.
3. Selling Calls
Another type of option is called a call option. When you sell a call option you give another trader the right to buy the stock from you at a given price. For this you recieve a premium. If the stock stays below that price the call will expire worthless and you walk away with the free premium.
The downside to this is that the stock could potentially shoot up to infinity. So your risk is unlimited. To get around that you have to buy another call option at a higher strike price to limit your risk. For example if you sell the $40 call you can also buy the $45 call. This would limit your risk to $5 and you could still make money from the difference between the two stocks. - 31970
About the Author:
Learning what caused the great depression and how to prepare for another crash can help you out if we ever do see another crash like the 1929 Stock Market Crash
