Profiting from Panic Selling

March 08, 2014   |   March 2014 Bond Updates
The selling on Monday, February 3, started overseas as the Spyder Trust (SPY) opened lower and continued to drop throughout the day settling at $174.17, which was 2.2% below the prior Friday's close. The range in the futures reflected even more violent selling as they opened Sunday night at 1777.50 and hit a low of 1732.25. The intra-day range was a whopping 51.5 points as the liquidation was relentless. There had been a similar sharp drop on January 24 as the decline in the emerging markets currencies triggered an initial wave of selling. On that Friday, the S&P futures lost 33.7 points and made a short-term low early the following day as the futures stabilized for the four days. Those who established short positions as prices moved sideways were rewarded by the plunge on February 3, but how many on the short side took profits that day? I am sure some did but many instead were expecting stocks to plunge further throughout the week possibly doubling their already sizable profits. They were likely dismayed when the SPY actually closed the week higher. Those who were still holding short positions likely had a sick feeling in the pit of their stomach. How can you avoid these situations?

View more at: http://www.forbes.com/sites/tomaspray/2014/03/08/profiting-from-panic-selling/
 
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