Why Trading Down Markets Is Better than Trading Up Markets
Posted on Friday, April 22, 2022 at 3:59 PM
Dan Passarelli, CEO - Market Taker Mentoring
A lot of traders panic when markets are falling. Even if markets are just trending lower, traders get bummed out. But I'm here to tell you nothing is farther from the truth. I'm here to tell you why trading down markets is better than trading up markets.
This statement is especially true for option traders. See, when markets fall, options get more expensive because implied volatility rises. That's the supply and demand component of option prices.
While calls may lose value and puts may gain as the underlying stock falls, they both get "a bump" higher along side that directional effect because of the rise in implied volatility.
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