How Not To Lose Money In Trading? | My Trading Strategies For Bullish, Bearish And Volatile Market

In the past year, we have seen the stock market turn from bullish to bearish to volatile, where it rallied one day and plunged the other day.

So, in this article, I wish to share the different strategies that I am using to trade these markets. The strategies are simple and easy to implement and do not require you to master the complex concepts of certain options strategies.

Bull Market
In a typical bull market where share prices are rising, I would use the most powerful strategy known as LEAPS, as it can help to magnify my gains considerably. LEAPS stands for Long-Term Equity Anticipation Securities, which basically refers to buying a CALL/ PUT option contract with a long expiration date, at least 6 months or more.

More information about LEAPS can be found in this thread:
The Ultimate LEAPS Options Thread

There are risks to using the LEAPS Strategy as it can magnify loss as much as it can magnify gain if the bullish market trend reverses into a bearish trend.

Read more on the risks of using LEAPS here:
The Risks Of LEAPS Options Trading & How I Mitigate Them

I will also sell PUT contracts as the rising share prices mean that contracts are not likely to be exercised (as the share price is like to be higher than the strike price upon expiration) and I can keep collecting premium by rolling PUT contracts. The disadvantage is that I will need more capital as collateral in case the contract gets exercised.

You can refer to this trade as a reference:
How I Made USD$9,827 In 3 Trading Days Using The Easiest Option Strategy

Bear Market
In a bear market, buying LEAPS CALL options, which require the share price to keep increasing to earn profits, is not an advisable move. So, in a bear market, I will be selling CALL options instead.

Generally, a CALL options seller would not want the share price to rise above the strike price upon expiration, because in this way, he does not have to sell away his shares at the agreed strike price. He gets to keep the full premium when the contract expires worthless. He is then able to open a new covered call contract and collect another round of premium.

When the market turns bearish, I usually sell ATM CALL options to collect a higher premium and continue to roll the contract to a lower strike price or later expiration date if the share price continues to fall. In this way, I get to collect more premium from selling covered call.

You can refer to this trade as a reference:
[14 Feb 22 Trades] USD1456 Profits In 7 Days By Rolling Tesla Covered CALL Contracts

Volatile Market
A volatile market is usually one filled with plenty of uncertainties, like the one we are currently in now, as investors are guessing what is the next move that the Federal Reserves is taking, with regards to rate hikes. In a volatile market, stocks can rise up fast one day and plunge the other day.

So, how I trade in a volatile market is as follow, I sell OTM CALL options with a Strike Price (SP) that I am comfortable selling, which is usually above my average (breakeven price) or is a share price that I think is not likely to be reached on expiration. For example, I usually use a 20% buffer for the SP, i.e. SP is 20% above existing share price.

In the event that the share price spikes above strike price near expiration date, I have 2 choices, either let the contract get exercised at the price that I am okay to sell or buy to close the contract, usually at a loss. I then sell a new covered call contract to recoup my loss.

If the share price continues to fall, I will be rolling the covered call contract to earn more premium, as explained earlier in the bear market section.

2021 is a year where many people talk about how to make more money from the stock market but I think in 2022, it is a year where we learn how not to lose money in the stock market. I hope the above tips are useful to you in your trading journey and can help you get some decent returns this year. All the best!

Keen to learn about options trading but do not wish to pay for expensive courses, this newbie guide will help gain the knowledge and fundamentals to understand options better. And it’s totally free!
The Newbie’s Guide To Options Trading

The LEAPS Strategy has helped me make more than USD120,000 in 2021. Here’s all you need to know about this strategy that can help you increase your wealth exponentially:
The Ultimate LEAPS Options Thread

Looking for ideas on what stocks to invest in or which stocks to trade? You can take reference from what I have been buying or selling. I try to update them as soon as I can in this section, as well as share my thoughts behind executing these trades:

Excited to start your trading journey or perhaps try out with a paper trading account to build your confidence in trading? Check out this step-by-step to help you get started:
How To Buy Options on Interactive Brokers (Step-By-Step)

If the bear market in 2022 is making feel depressed as your stocks come tumbling down, read this article to find out how you can use options trading to help you claw back some of your losses as you await market recovery:
How I Do Earn Even When The Stock Market Is Bearish?

I watched tons of videos on YouTube since 2020 and if you are wondering if there are any useful channels that you can subscribe to for learning market trends, TA, FA, check out this compilation here:
My Secret Weapons For Options Trading: I Watch These YouTube Financial Channels Every Day

I concluded my first year of options trading with more than USD160k of gain, see how I do it and the capital I use for every month to give you a sensing of the percentage yield I get out of my gains:
1st Year Options Trading Recap: The Journey Towards SGD$217,509 Profits In 2021

This blog is as authentic and as transparent as I can share, I do not just show the wins and hide the loss. I have made some very bad decisions in the first 8 years of investing and paid a huge price for them. Here is the loss I have accumulated during these years. I hope you learn some lessons from my mistakes.
I Cut $135,715 Worth Of Losses In The Last 1.5 Months

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2 thoughts on “How Not To Lose Money In Trading? | My Trading Strategies For Bullish, Bearish And Volatile Market

    1. Hi Conrad, it does not have to hit strike price to be profitable, as long as the share price drops from the share price when you purchase your PUT contract, you will have a chance to make profits. Fyi, the LEAPS PUT that I bought on Friday (10 June 22) are now profitable and if I decide to sell them away, the profts will be realised.


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