Stocks Going Down? No Problem!
Over the past few articles, I’ve talked about how to collect instant income, especially as it concerns the stock market.
I’ve illustrated how you can receive upfront income just for your promise to buy a specific product for a specific period of time at below-market values.
But did you know those payouts can fluctuate when there’s a little bit of panic in the air?
It’s true! You can watch me get on my computer and execute the exact “promise” I’ve been taking about it.
Alright, let me explain why we like volatility…
Typically, when the stock market drops, investors lose all sense of emotional stability and start to bail on their investments like rats from a sinking ship.
Many times, this market action feeds on itself and creates heightened volatility, which causes stocks to have larger price swings than normal.
That sounds stressful, no doubt, but I assure you that’s a good scenario.
Because, when it comes to your promise, you’ll get paid more during those volatile times.
And, in fact, I can almost guarantee you won’t be afraid of the down-moves anymore. You’ll relish it.
There’s actually a way to calculate how much more money you can collect when volatility is higher.
Let’s say volatility is factored at 25. When we plug that into our formula, we see that we can collect $25 upfront for promising to buy a $100 product for $75. We’re held to this promise for eight months.
But what if volatility is a little higher? Say, 27? Well, turns out we’ll get $35 upfront for the exact same promise under the exact same terms.
There are very simple calculators out there that can give you all the data, but the core idea is right there: When the going gets volatile for prices, we can make more money. And this is all because of perceived future price fluctuation! It might not even happen!
In the end, we’re still happy to buy the product at $75. We’re just getting paid more money this time around. Not bad, eh?
To reiterate, heightened volatility in the stock market usually coincides with downturns. Embrace it, and use it to your advantage.
No need to fear the bear!
— Lee Lowell