With the extreme volatility of the recent 4.5 percent pullback in the S&P 500, many investors are worried about where the stock market is headed.
For traders that believe the recent dip is merely the beginning of a much larger pullback, here are some potential ways to profit off of a market downturn.
Short Sell Individual Stocks
There are two inherent benefits to owning shares of stock.
One is that the market, volatile as it may be, has a general upward trend over time because of the general growth of the economy. The other advantage to owning shares of stock is that the maximum risk is capped at a 100 percent loss, while the reward is potentially limitless.
When short selling a stock, these two advantages are flipped to disadvantages.
The best-case scenario, improbable as it may be, would be a 100 percent gain from short selling a stock that eventually goes to zero. However, if the share price of a shorted stock doubles or triples, losses can amount to multiples of the size of the initial short position.
Related Link: Is There Any Hope For ...
More...