Whoa! What happened to Facebook? The stock lost just over twenty percent of its value in four days between July 25 and July 30. If you invested in the stock a few months after the IPO in 2012 you bought Facebook for $18 a share. And, if you had sold at the peak on July 25th, you would have gotten $217.50 a share for an eleven-fold, 1,100% profit. We all wish we had the foresight to spot every Facebook opportunity in order to buy and sell at the right times. But, successful investors live in the “now” and not in the past. A lot of people lost a lot of money when Facebook’s market cap fell by more than $100 billion. But, not everyone lost money in the last few days with Facebook. We would like to consider how to profit when other investors lose their shirts, when stocks like Facebook correct or crash.
How to Profit When Other Investors Lose Their Shirts
- Take timely profits
- Be a contrarian
- Options trading
How to Profit When Other Investors Lose Their Shirts: Take timely profits
An old but still-useful investment strategy is to take a profit when you make a profit. As the Facebook experience shows, just because the stock price when up, you did not make money. You only make money when you sell. Because, any investment can always fall in value. The problem with this approach is that you miss out on more profits if the investment continues its upward climb.
How to Profit When Other Investors Lose Their Shirts: Be a contrarian
Warren Buffett famously said that investors should be fearful when everyone else is greedy and greedy when everyone else is fearful. If you combine this contrarian approach with sound analysis of intrinsic stock value, you greatly improve your odds of making a profit when other investors lose their shirts.
How to Profit When Other Investors Lose Their Shirts: Stock options
We have written about how to use options to protect your investment portfolio and how to make money selling options. Another approach is to use options to make money whether a stock goes up or down. Wisely placed options trades take advantage of the leverage that options offer and limit any potential losses to the price of an option contract. We are currently featuring such an approach by the Weekly Money Multiplier in an upcoming webinar. Attend the webinar and learn how to profit when other investors lose their shirts.
The Horse Is Not Out of the Barn
CNBC writes that the horse is out of the barn with Facebook and other tech darlings.
Fears of a widespread tech wreck have been greatly exaggerated, says BTIG’s chief equity and derivatives strategist Julian Emanuel.
Even as Facebook, Twitter, Netflix and Intel were taken to the cleaners after recent earnings reports, Emanuel says one area of the market suggests the selling has reached its peak.
Perhaps Facebook is done falling and maybe it will come back. Or, maybe it will keep falling. For options traders, how to profit when other investors lose their shirts is to be alert for opportunities and learn to limit losses and magnify profits with well-placed trades. If you want to learn how, sign up and attend the webinar.