Stocks, Forex and Other Money Matters

There are a lot of people who think that we are going torwards another great depression. Is it true? Well know one knows what will happen for sure, but we can prepare for it. There are a number of ways to make money during a stock market crash.

In fact stock crashes have the potential to make traders much quicker gains because stocks go down faster then they go up. So, how can you make money in a stock market crash? Here are 3 strategies that can help traders profit from a falling market.

1. Shorting Stocks

Shorting is the process of borrowing stock and then returning it. By shorting a stock you simply borrow it from your broker and then sell it. Later on you will have to buy it back and return it to your broker. The idea is to sell stocks high and buy them back lower.

2. Buying Puts

Puts allow an investor to have the right to sell a given stock at a given price at some point in the future. So, if you buy a put it will increase in value and make you money as the stock goes down. This is because even though the stock is going down in value you still have the ability to sell it at the same price.

3. Selling Call Options

Another strategy is called the bear call spread. In this scenario you simply sell another trader the right to buy a stock at a specific price. As long as the stock stays below that price the call option will eventually expire worthless making you money.

Of course if it goes up there is no limit to how high it can go, so the risk is unlimited unless you buy a higher call option. For instance if you sell the $50 call for $5 and buy the $55 call for $3 you would profit from the difference, $2. You would also limit your potential loss to $5 because even if the stock goes to infinity you can always buy it at $55.

Learning what caused the great depression and how to make money in that situation can help you to prepare in case we see another crash like the Stock Market Crash of 1929

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