How to Make Good Use of Options in the Intensifying "Panic" Sentiment in the US Stock Market?
The panic index has surged significantly in recent weeks, rising by about 40% in just two weeks.
Recently, the US stock market has been continuously declining, and selling stocks and building hedge portfolios have become exceptionally popular as people begin to realize the difficulty of the Federal Reserve's planned economic soft landing.
Many people mistakenly believe that the US government is unlikely to shut down on October 1st. Rating agency Moody's warns that a government shutdown would be a "negative credit" and would indicate dysfunction in the US political system compared to other AAA-rated sovereign countries.
Will there be a massive sell-off in the US stock market?
The yield on 10-year US Treasury bonds is around 4.55%, close to last year's highest level.
Compared to stocks, the return on risk-free bonds is becoming so competitive that many investors find it difficult to accept high price-to-earnings ratios in the expectation of continued stock price increases.
The S&P 500 index recently closed below the support level of 4330 points.
Technical analysis always seems like witchcraft, but many people pay attention to it. If enough people believe that the long-term trend line has been broken, it can trigger a massive sell-off.
Investors often turn a blind eye to recent risk warnings, which is a worrying sign.
How to use options to deal with panic?
The Chicago Board Options Exchange Volatility Index (VIX), also known as the fear index, has recently surged, rising by about 40% in just two weeks. It was 12.82 on September 13th and is currently around 19.
It is unsatisfactory to advise caution, but this is the message the market has been sending.
Long-term investors will have the opportunity to monetize "fear" by selling short-term put options and buying blue-chip stocks that they can hold for many years.
Pay close attention to favored stocks and consider selling short-term put options if there is a situation that causes a significant drop in stock prices.
When everyone is scared and confused, option volatility soars, and stock prices become attractive. Be prepared.