Nearly 20 years ago, I sat in the living room of the Italian consul to the United States.
She lived in Denver, but a sign on her front door informed me I was “leaving the United States.” Their home was foreign territory.
But I didn’t need my passport to enter. I had an inside connection.
I’d been invited over by her husband, a stock analyst and good friend of mine. We met a few times a year, to discuss our lives and latest research. He’d recently published a chart showing the distribution for the biggest winners and biggest losers of the past year.
I found the results surprising, but he told me it wasn’t unusual. In fact, it was the norm.
He discovered this market pattern in the 1960s, using a program he developed in Cobol (a pre-Python programing language).
And the more he studied it, the more data he found to back it up. Over 62 years of bull markets, bear markets, and sideways markets, this pattern has stayed the same.
Today, traders who ignore this simple truth are missing out on major profits…
Stocks Go Up — Even in Bear Markets
Yesterday, Amber showed you why you shouldn’t trade puts in market sell-offs. Due to higher demand, put options tend to be overpriced. That makes it harder to profit from them.
But that’s not the only reason you should avoid puts…
As my friend explained in 2004, stocks end the day higher 50% of the time — even in bear markets.
The chart below covers the market decline that began in October 2007 and ended in March 2009. The S&P 500 fell 58% in that time. Yet, on half the days, there was a gain of at least 0.01%.
This chart shows the number of days that stocks closed within the indicated range.
The y axis on the chart above shows the number of days the market saw each percentage change on the x axis. The largest green bar, for example, indicates the market rose between 0% and 2.5% on 90 days of the bear market.
There were 235 trading days during the last bear market. On 51% of those days, the SPDR S&P 500 ETF (SPY) closed higher.
Usually, it was a small gain of less than 2.5%. Big moves were rare, with the S&P 500 gaining more than 7.5% just 1% of the days. The same was true for losses.
This shows that day-to-day action can’t be used to forecast the broader trend. Looking at these numbers, you wouldn’t guess that SPY dropped 58% in those two years.
The same can be said for today’s market. Though it’s down nearly 18% in 2022, SPY closed higher 52% of the time. The median daily return was a loss of just 0.05%.
Traders expect SPY to close in the direction of the trend a majority of the time. But that’s just not the case.
That’s why 2022 has handed us countless opportunities to profit on daily price swings… Without touching a single put option.
Andrew Keene knows this better than anyone.
His ability to trade market downturns made him a multi-millionaire in the last bear market. But this time around, he’s doing things differently…
See, in 2008, Andrew exclusively traded put options. It’s what the smart money was doing at the time.
And it’s what many individual traders are trying to do today — with little success.
Meanwhile, hedge funds, institutional traders, and the wealthiest investors in the world are trading the upside in 2022… And making major profits.
By simply trading the same calls as the smart money, members of Super Options have landed six triple-digit gains this year.
Over a four-month period, their portfolios were up 139%. (For reference, the broad market fell 20% in that same time.)
And this afternoon at 4 p.m. ET, Andrew is telling readers of True Options Masters everything…
If you haven’t already, click here and reserve your free seat at his presentation. This could very well be the most important message you hear in the next few years.
Michael Carr, CMT, CFTe
Editor, True Options Masters