How To Make Money In A Volatile Market – What has worked for the past nine years during the bull market may not work in the future. For investors who are serious about making money, it’s time to brush up on your skills and learn new strategies.
In the Arora Report, we advocate diversification with strategy. We have over 50 strategies in our quiver. One suitable strategy for these volatile times is the “buy strategy.” In this strategy, the focus is on finding companies that can be bought, generating huge profits for investors. To date, 144 portfolio companies have been acquired or benefited significantly from mergers and acquisitions.
How To Make Money In A Volatile Market
Please click here for annotated chart of the purchase of the biotech company, Tesaro US:TSRO, by the pharmaceutical company GlaxoSmithKline GSK, -0.47% .
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Please click here for annotated charts on the purchase of the software company, Red Hat US:RHT, by IBM IBM, -0.23% .
Please click here for the annotated chart of the buyout of the defense and aerospace company, Esterline Technologies US: ESL, by TransDigm TDG, +1.54%. Note the following:
• Astute investors are not prisoners of the movements in the Dow Jones Industrial Average DJIA, + 0.28%, S&P 500 ETF SPY, + 0.63%, Nasdaq 100 ETF QQQ, + 1.00%, small-cap ETF IWM, + 0.26% and similar index-based investment vehicles.
• Money should be made without limiting yourself to popular stocks such as Apple AAPL, +0.59% Facebook US: FB, Netflix NFLX, +1.68% and Johnson & Johnson JNJ, +0.11%.
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• The first chart shows that Arora’s buy signal for Tesaro is at the average buy price of $34.61. On November 16, when the stock was trading at $30, we wrote: “It wouldn’t surprise me to buy north of $75.”
Ten trading days later, Tesaro received a cash purchase offer at $75 per share from GlaxoSmithKline. In the investment business, it doesn’t get much better than this trade. The buyout price represents a return of 116%.
• Tesaro focuses on poly ADP ribose polymerase (PARP) inhibitors. PARP repairs cell damage. However, in some forms of cancer, cancer cells are more dependent on PARP than normal cells. This makes PARP an attractive avenue for cancer therapy. GlaxoSmithKline is interested in this strategic oncology asset and is willing to pay top dollar.
• The chart shows The Arora Report’s signal to buy Esterline at an average price of $84.80. About two months later, TransDigm made a cash purchase offer of $122.50. That is a gain of 44%.
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• The number of large aerospace and defense companies has decreased. There is a scarcity value, and buyers are willing to pay for Esterline. The acquisition is accretive for TransDigm.
• The chart shows Arora’s buy signal on Red Hat with an average buy price of $43.41. At the time of the original call, we said that Red Hat was a buyout target and that IBM was one of the most likely buyers. Now IBM is buying Red Hat for $190 per share in cash. That’s a return of 340%.
• Red Hat is known for its open-source Linux software and popular add-on software for infrastructure. IBM has lost ground to Microsoft MSFT, +1.04% , Amazon AMZN, +1.00% and Google GOOG, +1.53% GOOGL, +1.45% . It’s only logical for IBM to buy Red Hat to stay in the game.
Ask Arora: Nigam Arora answers questions about investing in stocks, ETFs, bonds, gold and silver, oil and currencies. Have a question? Send it to Nigam Arora.
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Disclosure: Subscribers to The Arora Report may have positions in the securities mentioned in this article or may take positions at any time. Nigam Arora is an investor, engineer and nuclear physicist by background who has founded two Inc. 500 fastest growing companies. He is the founder of The Arora Report, which publishes four newsletters. Nigam can be reached at [email protected]om.
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Changpeng Zhao, CEO of Binance, told Bloomberg Thursday that he regrets not tweeting about FTX’s concerns sooner. You are here: Home 1 / Market theory 2 / Volatile futures. What is it and how to make money from it?
Volatility… Futures… A strange and somewhat scary word for beginners in the financial markets. But, in reality, everything is simple. We have written about the future for beginners in detail. Now, let’s find out what volatility is.
The word ‘volatility’ comes from the Latin word ‘volatilis’, which means fast, quick, unstable, elusive and variable. It has the same meaning in English.
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In other words, volatility is unstable. If we use the term volatility in the financial market, it means that the price is unstable and fluctuates per unit of time. This is illustrated in the figure below on the futures chart of the GBP/USD currency pair:
A bullish chart with volatility growth (red rectangle), while an involatile market chart is a tepid flat (blue area).
Let’s compare it to the sea, because the market is also a wave. A wind scale unit storm of 6-9 is high volatility, while a calm is low volatility.
If we measure the volatility of the ocean in units, how do we measure the volatility in the futures market? Usually, price changes are measured in percent – from low to high at a given time.
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Another example of volatility is seasonal sales. 50% off Christmas and more! Prices are down due to store closings. This is an example of a volatile market.
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Futures contracts are derivative instruments, which follow asset price quotes. Consequently, the volatility in the futures market is really influenced by factors, which affect the price of the underlying asset.
Let’s take oil as an example. As soon as the world learns about some important news, related to the price of oil (usually any news that affects the price of oil in the modern world), the market becomes volatile, because the demand (buyer) and supply (seller) sides start looking for a new balance, which will take into account this piece of news.
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Consequently, if you seriously plan to trade in one market, you need to understand all the important price formation factors.
The market becomes active at the moment of breaking the previous extreme point, when it trades near the psychological level on the day of expiration.
Let’s consider ATR and Bollinger Bands as examples. That is the indicator is the most popular instrument for measuring volatility. Let’s load on the futures chart of the USD/RUB currency pair (day period).
The arrow on the chart shows now (end of May 2019), when price volatility is decreasing in the market. As a result, the ATR indicator takes a value, which is close to the bottom, when the BBands are ‘contracted’.
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The image above shows the VIX (Volatility Index) chart for 1 year. This instrument shows price volatility in the American stock market. The peak VIX indicates that the market was very volatile in December 2018 and stocks traded in wide fluctuations.
The VIX was developed by the Chicago Board Options Exchange (CBOE) as a criterion for assessing the 30-day expected volatility of the US stock market. Real-time price quotes of the S&P 500 and call and put options data are taken as a basis. A high VIX value means the market is high risk.
However, what attention is paid to volatility in many of these trading setups? We think that is not enough, because Strategies can send different signals in different market activity conditions.
If, in low volatility conditions, one 5-minute candle can turn into 1,000 trades, there can be 10-100 times more trades in the next 5 minutes after an important news release. And it is not surprising that the indicators, which are used by traders, can be scaled and behave chaotically in these cases.
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If you are looking for reasons why the indicator does not work, pay attention to the volatility in the case when your trading is losing. Perhaps, the indicator is not bad, it just does not work correctly in certain situations.
Below are two graphs. 15 minute chart on the left and tick chart on the right. Moving charts create new candles with several trades executed and not at the same time. This type of chart allows developing areas with higher volatility and chart contracts when the market is inactive. Note the volume. It is as if they are ‘combed’ and aligned in the correct chart. This is the result of the fact that the moving chart smoothly distributes the trading activity on the horizontal axis.
Classic Stochastic indicator
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