Title: Maximizing Returns During Market Volatility: A Strategy for Savvy Investors
Are you hesitant to buy into market dips but don’t want to miss out on potential comebacks? At Extreme Investor Network, we have a unique strategy for you. Market volatility and corrections are common occurrences, but they also present lucrative opportunities for investors who know how to navigate them effectively.
According to Warren Buffett’s famous quote, “Be greedy when others are fearful.” This sentiment holds true, especially when the Cboe Volatility Index (VIX) is high. Historical data shows that when the VIX is above 30, the S&P 500 has seen significantly higher returns in the following month. In fact, the market has been higher about 77% of the time a month after the VIX surpasses 30.
While the current market may not have officially entered correction territory, there are still ways to capitalize on the volatility. Instead of committing new capital to equities, consider using call spreads to make bullish bets. A call spread offers defined risk and helps mitigate the impact of elevated volatility on options premiums.
For example, you could buy SPDR S&P 500 ETF Trust (SPY) January $525 call options and sell nearer dated September $550 calls in a diagonal spread. This strategy, often referred to as the “poor man’s covered call,” provides a lower-cost alternative to purchasing underlying shares and limits total risk to the premium spent on the spread.
While a higher VIX typically translates to higher short-term returns for the S&P 500, it’s crucial to monitor market movements and adjust your strategy accordingly. At Extreme Investor Network, we believe in maximizing returns during market volatility by leveraging innovative trading tactics and staying ahead of the curve.
Disclaimer: The opinions expressed in this content are solely those of Extreme Investor Network and do not reflect the opinions of CNBC or its affiliates. This information is provided for informational purposes only and should not be considered financial, investment, tax, or legal advice. Before making any financial decisions, consult with a professional advisor to determine the best course of action for your individual circumstances. Click here for the full disclaimer.