There are as many ways to make money in the market as there are people.
Some folks will say stocks move randomly and the best way to win is to buy an index fund — and they may be right.
Most hedge funds and mutual funds don’t beat the market; they come a percentage or two short. Perhaps this is because they employ conservative bean counters and then tell them not to lose money. If you lose money, investors tend to flee.
Or perhaps it is because they buy the largest companies and therefore are the market.
Then there are momentum traders. These are the people who chase the hot hand. They buy high with the idea they will sell higher. “The trend is your friend” was the popular saying in the late 1990s during the dot-com bubble.
Bubble Trouble
The problem with momentum trading is that it can be hard to tell when it is going to run out. And stocks go down a lot faster than they go up.
The third type of investor is the value investor. These are people like Graham and Dodd who crunch the price-to-earnings, price-to-book, price-to-earnings growth, or some combination of value metrics they made up on their own.
They preach “buy low and hold forever.” It’s a nice system and it works. The power of compound interest is the greatest power on Earth. The problem is that forever is a very long time. It’s great if you are a vampire but lousy if you want to be young and rich.
The fourth type of investor is the contrarian investor. A contrarian investor is one who buys when everyone is selling and sells when the masses are buying. In other words, a good contrarian buys fear and sells greed.
It works for one very simple reason: Once all the buyers have bought, there is no one left but sellers. The asset has to go down and vice versa.
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Big Gains for Contrarians
In my trading service Launchpad Trader, we made 189% on Freeport-McMoRan, a gold and copper play, because I bought it when everyone hated copper and had hated it for 10 years.
My readers, people just like you, have also made 230% on Draganfly, a drone company. We also made 70% on General Motors and 42% on Denny’s (the restaurant) during the pandemic.
This year, the total closed cumulative portfolio is up 1,253.65% with an average gain of 50.15%.
These types of returns seem unlikely, but they happen all the time. The biggest and fastest gains happen when all the sellers have sold and there is nowhere else to go but up.
All the best,
Christian DeHaemer Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor’s page.
Check us out on YouTube!P.S. Here is Sean with a profit-taking announcement:
Options Action Alert — Sell Your SMH $260 July 2021 Calls ASAP!
A perfect trade isn’t perfect until the cash hits your bank account.
That’s why if you acted on last Friday’s Energy and Capital Options Action alert, I now want you to sell your VanEck Vectors Semiconductor ETF (SMH) July 2021 $260.00 call(s) that expires on July 23, 2021, ASAP! Here’s why.
Faster than I even expected, the share value of SMH surged and is about to hit $260. It could happen as soon as I finish typing this sentence.
This means our call option is right “near the money” and by the time you read this, our call option on SMH should be “in the money.” That means the sooner you sell, the higher a return you will receive due to “time decay.” That’s now in effect.
Here’s how this trade will play out, provided you act as I recommend and sell your SMH call(s) immediately upon receiving this alert.
By selling our VanEck Vectors Semiconductor ETF (SMH) July 2021 $260.00 call(s) at market today, you should be able to lock in a premium of $525 per option contract you sell. Since our purchase of the SMH call option only cost us $335 per contract, we will walk away with a gain of 56% and a net profit of $190.
Not a bad win for one that materialized in a few days over the weekend! That’s why options are so freaking fun and exciting!
Now go enjoy your big win! And stay tuned for your next trade in Energy and Capital Options Action Fridays.
Sean McCloskey
