To The Moon

Stocks fell Thursday morning, erasing earlier gains, after a key consumer inflation report came in hotter than expected, signaling that the Federal Reserve will likely continue with aggressive interest rate hikes.

The Dow Jones Industrial Average fell 500 points, or 1.73%. The S&P 500 slipped 2.10% and the Nasdaq Composite slumped 2.80%. Shares of large consumer companies led the losses as the inflation reading stoked fears that spending will take a hit.

How to profit during a market crash?

1. Inverse ETF

The easiest way to hedge risk is to buy an inverse ETF that goes up when the underlying index it tracks goes down.

Investing in inverse ETFs is similar to holding various short positions, which involve borrowing securities and selling them with the hope of repurchasing them at a lower price.

• ETFs to short $DJIA(.DJI)$: $ProShares Short Dow30(DOG)$, $ProShares UltraShort Dow30(DXD)$, $Dow30 Bear 3X ETF(SDOW)$
• ETFs to short $NASDAQ 100(NDX)$: $ProShares Short QQQ(PSQ)$, Bear 2X-$ProShares UltraShort QQQ(QID)$, $Nasdaq100 Bear 3X ETF(SQQQ)$
• ETFs to short $S&P 500(.SPX)$: $ProShares Short S&P500(SH)$ , $S&P 500 Bear 2X ETF(SDS)$ , $Direxion Daily S&P 500 Bear 3X Shares(SPXS)$
• ETFs to short $iShares Russell 2000 ETF(IWM)$ ：Bear 2X-$ProShares Short Russell2000(RWM)$, $Direxion Daily Small Cap Bear 3X Shares(TZA)$

Click here for more details: SPX Outlook & All Tickers/ETFs to Hedge the Down Market

2. ETFs related to safe-haven assets

To hedge against a decline in the market, it is also a good idea to purchase safe-haven assets in addition to inverse ETFs.

A variety of safe-haven ETFs are available, including VIX(Volatility) ETFs, Gold ETFs, and Bond ETFs etc.

However, it should be noted that such assets may be subject to other risks. As an example, the supply of silver will impact the asset price, and the gold mining company ETF will be affected by market fluctuations due to its tracking of gold mining companies.

Tracking short-term futures of S&P 500 VIX volatility index

You can also go long volatility by buying a volatility ETF such as VXX. During early 2018, 10% sell-off in the S&P 500, the VXX doubled from $25.68 to $50.

• $VIX Short-Term Futures 1.5X ETF(UVXY)$Track short-term futures of S&P 500 VIX volatility index
• $ProShares VIX Short-Term Futures ETF(VIXY)$Track the short-term futures of the S&P 500 VIX volatility index
• $ProShares Short VIX Short Term Futures ETF(SVXY)$Track short-term futures of S&P 500 VIX

Gold ETFs

Gold tends to do well during a downturn. Even though gold generates no earnings and provides no dividends, it’s a commodity that can be traded. Gold ETF is an ETF linked to tracking the fluctuation of gold spot and futures. Buying such ETF is equivalent to buying gold spot itself. In general, the ETF price move along with gold in the spot market.

• $SPDR Gold Shares(GLD)$Gold ETF-SPDR tracks the spot price of gold (Loco-London gold), which is more than one time. It has the best liquidity, and the daily turnover is extremely large, which is suitable for trading on the right side. Once the trading direction changes, it can be taken out immediately.
• $iShares Gold Trust(IAU)$Gold ETF-iShares tracks the spot price of gold (refer to the global gold reserves), which is long. The trading volume is moderate, and the price difference range of buying and selling orders is reasonable.
• $ProShares Ultra Gold(UGL)$Gold ETF-ProShares tracks the spot price of gold (London gold), which is more than twice. It is more suitable for intraday trading, and futures such as gold are paid 24 hours a dayEasy, so the risk of staying overnight is not small.
• $ProShares UltraShort Gold(GLL)$Gold ETF-ProShares tracks the spot price of gold (Loco-London gold) and shorts it twice. Like UGL, it is not suitable to hold positions overnight.

Click here for more details:

Click here for more details: How to use VIX & SQQQ to Profit From a Down Market

Click here for more details: How a Russia-Ukraine conflict might hit global markets？

3. Short stocks or ETFs

You can also short individual stocks or ETFs as well if you feel you have an edge and want more direct exposure. The stocks that usually get hammered the most during a downturn are high beta stocks with weak balance sheets and no earnings.

Short selling is a trading strategy that speculates on the decline in a stock or other security's price.

In short selling, a position is opened by borrowing shares of a stock or other asset that the investor believes will decrease in value. You borrow the stock from the brokers with a certain amount of funds as a guarantee to sell, and when the stock falls, you purchase the same number of stocks at a lower price and return them to the brokers.

E.g.

Imagine a trader who believes that XYZ stock—currently trading at $50—will decline in price in the next three months. They borrow 100 shares from the brokers and sell them to another investor.

A week later, the stock falls to $40. The trader decides to close the short position and buys 100 shares for $40. The trader’s profit on the short sale, excluding commissions and interest on the margin account, is $1,000: ($50 - $40 = $10 x 100 shares = $1,000).

While short selling can be beneficial in a bear market, it is also very risky since the equity prices can continue to go up, and the risk of "short" is theoretically unlimited.

Click here for more details: [Short selling] Ways to Survive a Market Crash

4. Options

In addition to short selling, you can also hedge risks through options and achieve extar returns. Buy put can reduce the risk of a sharp decline in the stock market, while Covered Calls are intended to protect the portfolio against time fading.

How to trade options in Tiger?

Trading options in Tiger are simple, taking NIO options as an example:

• Step1: Search for [TSLA]& Enter the TSLA stock details page
• Step2: Click "Options" & select any option contract (Call or Put) to trade
• Step3: Click Buy or Sell button

Buy Put

• A put gives the buyer the right to sell a stock at a predetermined price (known as the option strike price).
• Buyers of put options are making bearish bets against the underlying stock.
• Buy put can reduce the risk of a sharp decline in the stock market. In this strategy, the biggest loss is the premium of options, which are less risky and more flexible than futures.

Sell Put

• A seller of put is taking on the obligation to buy the underlying stock at the strike price.
• Notice the difference in buying and selling puts: when you buy a put, you have the right but not the obligation to sell the option. 
• The sell put option strategy is preferred by some investors, especially long-term investors, to purchase a stock when its price falls below a certain level.

When you sell put, you can get the premium.

If the buyer does not exercise the option, your profit is equal to the entire premium.

If the buyer exercises the option, your profit or loss will be equal to((market price – strike price) * 100) + premium received = profit or loss.

One major risk of sell put is the risk of a margin call. If you sell put options but don't have the funds in your account to cover the cost if the option buyer were to exercise them, the broker may force you to sell other investments, even for a loss, to cover the liability. When selling puts, make sure you have sufficient margin in your account.

Covered Call

• A Covered Call hedges against a long stock position by selling a call on a stock that you already own. You can collect a premium if the stock price doesn't rise.
• If you want to hold a stock for the long term, but are afraid of a bearish trend, you can trade the Covered Call to hedge our position.
• Selling an Call option collects a premium. If the stock price does not increase past the strike price before expiration, you can keep all the premium.

A covered call has three risks.

1) requires too much capital and receives very low returns.

2) may miss sudden bullish moves in growth stocks.

3) may suffer a substantial loss if stock prices suddenly decline. So you should make sure you select lower IV stocks when using covered call.

Straddle

A straddle is a neutral options strategy that involves simultaneously buying both a put and a call for the underlying security with the same strike price and the same expiration date. Usually these options are ATM.

The biggest advantage of straddle is that it doesn't judge the stock will go up or down. It just trade the volatility and bet the volaitility is large enough to cover the cost of both sides.

The risk is the volatility is small and cannot offset the cost of purchasing two-side options.

Click here for more details:

• Watch OUT! Get Straddle and Strangle for earnings season.
• What is an Option?——learn about Call and put
• Video: Tiger Options Tour For Beginners to learn
• Options Trading and Settlement—what should we know before trading options？

As a final note, neither bear markets nor bull markets are frightening, as long as you determine the direction in which they are going, you can make money from them. $Tiger Brokers(TIGR)$