That gem comes from investor S. Allen Nathanson. And it’s a great point about the wealth-building power of a long-term investing mindset.
He’s largely forgotten now. But between 1966 and 1973, Nathanson wrote a series of columns about investing called “Bullishly Speaking.” As he wrote…
Buying into good growing companies and having the willpower and patience to hold one’s position over a long period of time permits the magic of compound growth to come into play; the results that can be attained are almost unbelievable.
It’s something I talk to you about a lot…
If you’re serious about making money in the markets, you must learn how to stay the course with your long-term investments.
For buy-and-hold investors, it’s time in the markets, not timing markets, that counts.
But the traders we feature in these pages have been making plenty of dough, too.
Over the last month, they’ve given their subscribers chances to close out short-term trades for gains of 35%… 60%… 90%… and 100%.
And those gains aren’t despite the bear market on Wall Street… They’re because of it.
So today, I’m going to part ways once again with the mainstream press.
I could write to about the Fed’s latest move. (It raised rates again today by 0.75 percentage points for the fourth time in a row.) But instead, I want to make sure every reader of this e-letter knows how to capture short-term trading gains like these, while letting time work its magic on their longer-term holdings.
The first three came by way of “Market Wizard” Larry Benedict over at his Opportunistic Trader advisory.
(Larry was featured in Jack Schwager’s book Hedge Fund Market Wizards alongside greats like Ray Dalio, manager of the world’s largest hedge fund, and MIT mathematician and trading legend Ed Thorpe.)
The 100% gain was on a trade Jeff Clark recommended at his Delta Report advisory.
As Daily Cut regulars will know, Jeff is a master trader with more than 35 years of experience.
He used to manage money for celebrities, entrepreneurs, and tech moguls in Silicon Valley. Now, he helps regular folks make money trading markets at his Jeff Clark Trader advisory business.
And both Larry and Jeff used options contracts to score these big wins in their model portfolios.
I won’t slow us down here with all the details about how the options market works. What you need to know today is that options allow you to place “side bets” on stocks.
When you trade options, you don’t own stocks directly… You buy a “call” option and profit as a stock goes up. Or you buy a “put” option and profit as it falls.
And you don’t have to wait years for gains.
The average holding time for Larry’s three trades – call options on Facebook parent Meta (META), Microsoft (MSFT), and JPMorgan Chase (JPM) – was just two and a half days.
Jeff’s 100% gain – from a call option on online bank stock SoFi Technologies (SOFI) – came only two weeks after he recommended the trade.
Larry and Jeff recommended their subscribers buy call options. These pay off as the stocks rise in price.
That may sound strange, given we’re in a bear market.
But that’s the beauty of trading options. You can capture gains as stocks fall by buying puts. You can also profit from the countertrend rallies during bear markets by buying calls.
Here’s a chart of the large-cap S&P 500 index back to the start of the year.
So far this year, the S&P 500 is down 19%. That’s the loss you’d have suffered as a buy-and-hold investor in an S&P 500-tracking fund.
But along the way we’ve seen six countertrend rallies of 5% or more – each one tradeable with call options.
Most traders talk in jargon. But Jeff likes to keep things simple.
And a simple way to grasp how stocks move over the short term, he says, is by thinking of a rubber band. Jeff…
My trading strategy revolves around finding emotionally overbought and oversold conditions that are ready to reverse – or snap back. Think of those conditions as a stretched rubber band.
We can all tell when a rubber band has been stretched close to the limit. The rubber at the center of the band stretches thin. Its color fades. It even starts to vibrate just a bit. That’s usually when it snaps back.
The same goes for the stock market. Jeff again…
When you’re trading stocks, it’s a little harder to tell when the snapback is coming. But there are clues…
Stock prices stray far away from their long-term averages. The technical indicators I watch on the charts reach extreme conditions. And TV’s talking heads all pile onto the same side. That’s when the logical-thinking trader decides it’s time to bet on the rubber band snapping back.
And the more volatile stocks become… the bigger the opportunities to profit.
During bear markets, volatility tends to spike.
This amplifies the potential gains traders can make… because they can harness these snap-back rallies for profit.
It’s what allowed Jeff to nearly double his net worth during the dot-com collapse – with a single trade.
And during the 2007–2009 bear market, Jeff handed his subscribers the chance to make transformative wealth.
Newsletter industry legend Porter Stansberry was his publisher at the time. Here’s what Porter wrote about Jeff’s track record on January 29, 2009…
Jeff’s trading this year in The S&A Short Report was nothing short of heroic. He made 52 recommendations – all of them short-term trades. Out of these, 42 made money. A win rate of more than 80% in options trading is ridiculous. The average return of every trade was a bit more than 31%.
That’s outrageous when you understand the short duration of these trades and the turnover in the portfolio. How outrageous? The cumulative total return was greater than 1,700%.
And I get that concern. A lot of rookie investors do use options to place risky bets.
They gamble, blow up their accounts, and lose their shirts.
But as Jeff has pointed out, when you use them the right way, options are less risky than trading stocks directly.
It’s something most folks don’t know about. But you risk less money to control a stock in the options market than you do buying the stock directly. As Jeff explains it…
Let’s say you want to buy stock in Company X. It trades for $10 a share. So you could spend $1,000 to buy 100 shares.
But you can control the same number of shares with one call option contract. You can buy that call for, let’s say, $50… and leave the other $950 in your account.
If Company X’s stock goes up, you’ll make money. If the stock goes down, the most you can lose is the $50 you spent to buy the call. That’s a 100% loss. But it’s a lot less in dollar terms than losing, say, 20% of the $1,000 you risked buying the stock. That would set you back $200.
That makes options a low-risk, high-reward way to trade the volatility that kicks up in bear markets.
And because you don’t need put much money at risk for a shot at outsized returns, you can leave most of your wealth in long-term plays… and trade with only a small portion of your portfolio.
He’s been warning folks about a $4 trillion “market snap” guaranteed to happen just days from now.
The last time this event hit, Jeff’s subscribers had more than 44 opportunities to profit using his strategy – all in just 40 days.
This setup is so urgent that Jeff is hosting a special briefing about it tonight at 8 p.m. ET.
He’ll shed further light on the coming market snap. He’ll also reveal how to prepare your portfolio to potentially earn double- and triple-digit trading gains.
Jeff will be on air just a few hours from now. So if you haven’t already secured you place for his briefing, make sure to sign-up for that here.
It’s free to attend as a Daily Cut reader. And even if you don’t act on Jeff’s advice, it’s a chance to learn more from a master trader about how to turn times like these to your advantage.
Regards,
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Chris Lowe
Editor, The Daily Cut