Is there any way for a small-time investor to profit off of a sudden decline in the U.S. stock market? If some catostrophic event happens, and everyone is rushing to sell their shares, could a small investor short the market- using QQQ’s- in time to profit??
Thanks.
It depends on how small the investor is. Most brokerages require substantial assets before they’ll let someone short stocks. After all, shorting involves the possibility of unlimited loss.
One way that people can realize huge profits from market declines is from buying put options. For instance, if you had bought some put options on some Internet stocks or even QQQ 2-3 years ago, or on Enron while it was flying high, you could have multiplied your investment at an insanely high exponential rate.
Of course, there are some catches. Most option buyers lose money. The bid/ask spread on some options can be high. Striking it big requires buying options on the right stock at the right time. It’s easy to lose a ton of money quickly in options. It’s highly speculative and risky.
If you have $25,000, you can do it easily at Rydex. Even $20,000 might work at Profunds (go check).
Rydex and Profunds funds are Mutual Fund houses that let you trade in and out of their funds on a daily basis, with no switching costs. And they happen to have a short Nasdaq and short S&P fund (200% geared versions as well). So, yeah, you can do it there. I’ve been trading them for years, great places.
-Tcat
This question comes up every few months. I wonder why? Certainly if it was a great way
to make a profit, everyone would be doing it, but they aren’t …are they?