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In a moment, I am going to tell you how to take advantage of one of best investments for the foreseeable future. But first I want to you to take heed to what I am about to tell you.
With a market rally like this, you owe it to yourself to take precautions. No market rises forever. So today I’m going to tell you a way to protect yourself from the likelihood that this market rally won’t continue indefinitely.
But first, some context …
The Standard & Poor’s 500 Index (SPY) is up 16.8%. That’s the best start to a year since 1987, when it rose 18.7% during the comparable period. Later that year on October 19th, the Dow lost 508 points, or 22.6%, in the historic crash known as Black Monday.
Moreover, it’s been 184 days since a daily 5% pullback in the S&P 500. The return for the market benchmark during this overwhelmingly bullish six months is 22.3%.
But it was the latest three-week spike higher in SPY made me realize the journey higher was nearly complete.
Roughly three weeks ago, SPY was trading for $153. Since that short time, the index has managed to tack on 8%. That’s pretty remarkable, considering the historical annual average return for SPY is approximately 8% a year.
The historic move has had a side-effect as well. It’s impacted the success of high-probability credit spreads over the past several months.
But before I get to the side-effect let me give you a brief insight into one of my favorite investment strategies. Other than selling puts, credit spreads offer the highest-probability strategy in the investment world. We’re talking about making investments with an 85% chance of success. Credit spread strategies are THE choice amongst professional investors, particularly professional options traders. The strategy allows you to make money in a up, down or sideways market in less than 45 days. As a result, it is one of the best ways to bring in monthly income and why I use the strategy, among others, in my Options Advantage service.
Unfortunately, we have been in one of weakest periods for credit spreads over the past 30 years. A sharply trending market coupled with historically low volatility is the one extreme credit spreads have a hard time handling. However, the most profitable periods have followed these weak periods…and I expect to see history repeat itself once agin this year.
Fortunately, this historic period is an anomaly, so the chance (or probability as I like to say) of the upward trend continuing is low. Unfortunately, it’s the anomalies that are a detriment to high-probability credit spread strategies.
But as we all know, it’s the weak periods that lead to historic returns.
This leads me to the investment I mentioned at the beginning of the article. I recently put together a webinar on what I call “The 77% Income Trade”. Within the presentation I discuss the strategies I use to bring in income on a monthly basis. But more importantly, I give away two actionable investments that should do well over the next 35 days.
Also, if you haven’t had a chance sign-up for my free weekly newsletter, The Strike Price….and if you want to know what I am thinking on a daily basis check out my Twitter feed.
Kindest,
Andy Crowder
Editor’s Note: If you would like to learn more about options and how you can generate steady income month in and month out… then consider taking a free, 30-day trial to our real money alert service, Options Advantage. You’ll discover exactly how our resident options expert, Andy Crowder, is using high probability trades to steadily grow a $25,000 real money portfolio. Every trade is executed for real… and readers are alerted instantly, so they can invest right alongside Andy. Click here to try Options Advantage, free.