The Best Way To Make Money In Market Downturns As Investors

As an investor, the core principle has always to put our cash to good use.

In this article, I will be sharing how we can create cash flow during market downturns, and more importantly, how we can put that cash flow to proper use.

The key to this is to take advantage of the market volatility and collect juicy premiums using the options wheel strategy.

How The Options Wheel Strategy Works

For most people, they use the options wheel strategy so carelessly that they end up getting margin calls and losing money.

However, there are actually ways to minimise your risk considerably. The answer lies in selecting the right stocks and selling the options only when its advantageous for you to do so.

The flow chart below shows you exactly how to execute this. If you like to find out more, you can also read more over here.

Using the options wheel strategy, I have collect several thousands of cash flow over the years. But the most important thing is to actually make good use of the cash flow in the first place.

Putting Cash Into Good Use

Cash is the worst asset - it is the sure-fire way for your money to lose its value due to inflation.

That's why, every dollar of cash flow that I collect, I am always looking towards how I can deploy that cash somewhere else.

Usually, I will use this cash to invest in quality companies like META, AAPL, GOOG, etc - when they are in the right valuations.

However, usually, during market downturns, I want to avoid being overly concentrated in any of the stocks.

That's why I will use that cash flow and invest in an ETF - which automatically helps me diversify.

For myself, I usually diversify into ETF such as NDAQ or SPY. This way, I am putting the cash flow which I have collected into good use, compounding my money over time.

Guess what, eventually when I collect 100 shares of NDAQ or SPY - I can sell call options to collect even more cash flow.

The Bottom Line

In times of market downturn, collecting cash flow by selling options is the smart thing to do, by leveraging on the heightened volatility.

However, you need to know how to minimise your risk when selling options. I have seen people who have gotten greedy and ended up getting their accounts wiped out.

This is the strategy that I use during market downturns. Collect cash flow, reinvest into ETF, repeat the process.

Eventually when the market recovers, all my companies would have appreciated and my portfolio would be bigger than ever.