Copyright

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DISCLAIMER: Stock, forex, futures, and options trading is not appropriate for everyone. There is a substantial risk
of loss associated with trading these markets. Losses can and will occur. No system or methodology has ever been
developed that can guarantee profits or ensure freedom from losses. No representation or implication is being
made that using the information in this special report will generate profits or ensure freedom from losses. Risks
also include, but are not limited to, the potential for changing political and/or economic conditions that may
substantially affect the price and/or liquidity of a market. The impact of seasonal and geopolitical events is already
factored into market prices. Under certain conditions you may find it impossible to liquidate a position. This can
occur, for example, when a market becomes illiquid. The placement of contingent orders by you, such as “stop-
loss” or “stop-limit” orders will not necessarily limit or prevent losses because market conditions may make it
impossible to execute such orders. In no event should the content of this correspondence be construed as an
express or implied promise or guarantee that you will profit or that losses can or will be limited in any manner
whatsoever. Past results are no indication of future performance. Information contained in this correspondence is
intended for informational purposes only and was obtained from sources believed to be reliable. Information is in
no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are
attempted.

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All rights reserved. No part of this publication may be reproduced or transmitted in any formor by any means,
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Published by:
Profits Run, Inc.
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Wixom, MI 48393
www.profitsrun.com

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Introduction
It doesn’t matter what market you’re in, what investment vehicle you’re trading,
or even what the expert analysts are predicting – because as an investor, there is
always one universal truth:
Any highly traded market is eventually going to crash at some point, and there’s
nothing that you, me, or anyone else can do about it.
Since the first crash on the New York Stock Exchange, dubbed the “Panic of 1901”,
the U.S. Stock Market has crashed an astounding 16 times, with half of those
crashes occurring in the last 18 years alone.

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Yes, the market eventually recovered from each crash, but the fact remains that
many investors got completely skewered in the process – swearing off equities
and retreating back to their savings accounts that barely keep up with inflation.
Others, who simply held on for dear life during times of financial crisis, watched
as their portfolios ping-ponged up and down for years, unable to do anything
about it. If you’ve invested in the past, I’m sure you understand just how
frustrating it can be when the market takes a sudden dive, leaving YOU to
somehow divine what comes next. And more importantly – what to do with your
hard-earned money tied up in plummeting securities.
As bad as that all sounds, I also want to tell you about a third type of investor,
who managed to actually bankroll their retirement during the crashes listed
above. They profited handsomely over each period of volatility in the past, and I
can guarantee they will continue to do so every time the stock market sinks in the
future.
When everyone else loses money, these well-informed traders happily gobble up
those long positions, turning them into massive windfall gains – time and time
again.
You may be wondering…
“How the heck do those guys keep getting away with it?”
And that’s a valid question – because short-selling, the most well-known way to
profit off a stock trending downwards, is an extremely dangerous strategy.
Unlike buying stock normally, where you’re limited to losing the amount you’ve
invested, short-sellers are exposed to unlimited, infinite losses. That means that
anyone who short-sells a stock could end up losing far more than what they put
into the trade in the first place – a scary thought to say the least.
Similarly, short-sellers can never, ever make more than 100% returns on any
single trade – assuming that the stock shorted goes to $0 per share, which again is
extremely rare, even during a crash.
Quite frankly, short-selling is a gamble, and far too risky for the average investor –
especially when the market is in a tailspin, as a sudden rally in the opposite
direction could instantly destroy your portfolio.

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So, then how in the world do those investors I told you about continue to rake in
the dough, crash-after-crash?
Two words:
Put Options
Stock put options are defined as:
“A stock market device which gives the owner the right, but not the obligation, to
sell an asset (the underlying stock), at a specified price (the strike price), by a
predetermined date (the expiration date) to a given party.”
In layman’s terms, it’s a way for investors to profit off a stock’s downward
movement without the risk (and regulatory hassle) of short-selling actual shares.
For example, a stock put option with a strike price of 100 means that the put
option buyer can use the option to sell the underlying stock at $100 before the
option’s expiration date – this what’s referred to as exercising the option.
But investors who buy put options won’t want to exercise their option unless the
underlying stock is trading a price below the strike price. Using the example
above, if the stock on that 100-strike put option was trading at $150, the investor
wouldn’t want to exercise their put option to sell the underlying stock at $100,
because they would be able to get a better price for it by simply selling it on the
market for $150.
If, however, the underlying stock was trading at $50, the investor with the 100-
strike put option would then be able to exercise that option for a profit, as it
would enable them to sell that stock for $100 per share – twice the market rate,
all because they bought a put option ahead of time on a downwards trending
stock.
However, in today’s modern trading environment, stock market bears (who
expect the market to go down) rarely buy put options to be exercised if they don’t
own some of the underlying security to begin with. The people who buy puts
while simultaneously holding a long position on a stock do so to hedge against
losses if the market drops – and that is NOT what investors profit-seeking
investors do during a crash.

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Instead, the “other” kind of investors I told you about (who can’t help but make
money during a downtrend) buy put options without ever intending to exercise
them. Because they don’t own any underlying assets, they can simply sell the put
option itself – in a highly lucrative investment strategy known as directional
options trading.
Unlike short-selling shares of stock, which exposes short-sellers to infinite losses,
put options limit the amount investors can lose to only what they originally paid
for the option. Similarly, traders of put options can make well over 100% returns
on any given trade, while stock short-sellers can only make 100% gains maximum
if the company behind the stock goes bankrupt – again, something that is highly
unlikely, even in a crash.
Because trading put options offers so many advantages over short-selling stock,
it’s become the best way to line your pockets while the market’s heading down in
flames.
And for our purposes in this guide, you’ll only want to trade 1 or 2-strike put
options, meaning that the strike price is 1 to 2 dollars away from the price of the
underlying stock or ETF. These options typically move 10 times as fast as the
underlying security, so a 10% drop on a stock could result in a 100% gain for the
put option on that stock.
But even though you now know what directional options trading is, it won’t be of
any use unless you have a time-tested, strict set of guidelines that tell you exactly
what stocks to buy put options for, and (most importantly) when to buy them.
With that, let’s take a look at the first step required to profit from a crashing
market…

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Step 1. Find The Stocks & ETFs That Are
Most Likely To Keep Crashing
So let’s say that after weeks of big-time gains in the market, a full-fledged crash
happens – sinking stock prices across the board. Bond yields are screaming up to
all-time highs, causing equities to plummet, and doomsayer analysts are smugly
remarking “see, I told you so!”
What do you do?
The first and most crucial thing you need to focus on in a situation like this, is to
correctly identify the stocks and exchange traded funds (ETFs) that are likely to
continue screaming downwards during a crash. And while that might seem like a
daunting task at first, we have tirelessly worked to create a tool called the “Profit
Screener”, which does all of the searching for you.
So, you don’t need to hunt endlessly for good trades, run analysis on
price/earnings ratios, or anything even close to that. All you have to do is simply
copy this one technique to potentially pocket massive gains on some “low
hanging fruit” stocks in low-risk trades.
What you’ll need to use our Profit Screener technique:
Charting Software
In order to actually screen for stocks, you’ll need to use some sort of stock and
ETF charting software that allows you to run “scans”, which use formulas (that
we’ve painstakingly tested) to dig up the best directional options trading
opportunities available.
In the example below, we are going to use TC 2000, a great charting software that
allows us to run scans with ease, but nearly any reputable charting software
solution (that allows market scanning) will work.
Setting Up Your Profit Screener

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After installing your preferred charting software, go ahead and click on the button
that allows you to run scans. In TC 2000, this is the EasyScan button as pictured
above.

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After clicking EasyScan, you’ll see a window, possibly pre-loaded with several
condition sets. Ignore those for now, and click on New Condition Set.

In the Edit Conditions window, you’ll then need to click on + Add Condition to
add the parameters of our Profit Screener to your newly created scan.

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Next, type optionable stocks in the search bar. This will make sure that our scan
will only bring us stocks that have available options to trade. It will bring up
Optionable Stocks, which you should then click on to bring the next window.

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Finally, in the Add Condition window, click on OK to confirm that you want to add
this condition to your scan.

After clicking OK in the Add Condition window, you’ll be brought back to the Edit
Conditions window, with Optionable Stocks Is True listed as a condition. From
here, you’ll need to click +Add Condition again to continue adding our different
conditions (one at a time) that make up the profit screener, which are listed
below. I’ve included all of the variables for each condition, and any values that are
required:
Price History > 10 – Daily
This condition makes sure we aren’t buying any put options on stocks below $10.
Options on stocks and ETFs trading below $10 limit our profit potential
significantly, so we want to screen those out.
Search for: Price History
Indicator: Price History Condition: Greater than
Value: 10.00 True: Now
TimeFrame: Daily
Volume Average > 1000000 – Daily

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This condition ensures that we only see stocks and ETFs that have a daily volume
of at least 1 million shares. It’s harder to trade options on low-volume stocks, and
we don’t want those showing up in our scan.
Search for: Volume
Indicator: Volume Condition: Greater than
Value: 1000000.00 True: Now
TimeFrame: Daily
Beta > 1.3
Beta, which measures how a stock or ETF moves relative to the market, is an
invaluable tool to technical analysts. The higher the beta, the more volatile the
stock is. We only want to trade put options on the “big movers” in the market, so
adding this last condition to our scan is crucial.
Search for: Beta
Beta: Greater than
Greater than: 1.30

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Once you’ve added all of your conditions, you then need to click on Save
Condition Set, enter in a name in the subsequent window that appears (you could
use Profit Screener in this case) and click Save.
This way, if you accidentally exit out of your scan conditions, you can then click on
the EasyScan button again from the charting software dashboard and find your
Profit Screener condition set.
So, now that you’re all squared away with your brand new Profit Scanner, let’s
click Scan and see what appears.

In this case, the Profit Screener kicked back 344 different stocks to focus on
because we have US Common Stocks selected in the upper left-hand corner. In
total, there are over 4,300 optionable stocks, so the Profit Screener managed to
eliminate roughly 92% of all stocks from the equation, as they are not good
candidates for put options trading.
This is an immensely powerful tool, because it’s able to save you a huge amount
of time that would typically go towards researching potential trades.

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However, what the scan didn’t identify was stocks that are headed downwards
during a crash. Don’t worry, though, because we’re able to find out which ones
those are with this one indicator:
The 10-Week Simple Moving Average

On your charting software, you can enable the simple moving average by right-
clicking on a chart, and then left-clicking + Add Plot…

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That will bring up something similar to the add condition window, where you can
search for moving average. From the list below, click on Moving Average –
Simple.

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Finally, you’ll want to click on the chart you’d like to add the simple moving
average to, in this case I’m looking at a chart of General Motors, or GM, so I’ll click
on that out of the options available.
By default, we’re given the 50-bar Moving Average, which we need to change.
Right-click the Moving Average 50 at the top of your chart, and then click Edit.
From here, you’ll be given a bunch of variables to adjust. All you need to do is
enter 10 in the Period field towards the top.
After doing so, click OK.

Lastly, in order to make sure this is a weekly moving average, we need to change
the chart interval to weekly, by clicking on the W towards the top of the chart.
In the image above, you can see that GM’s 10-Week Simple Moving Average is
sloping downwards, as highlighted by the purple oval.
For our purposes, the only puts we want to buy are on stocks that have a 10-
Week Simple Moving Average that is moving downwards on the most recent
weekly candlestick. This shows us that the stock we’re examining is strongly
trending downwards, and will continue to do so as the market keeps crashing.

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Buying put options on a stock that has shown us evidence that it will continue to
fall, during a major crash, is one of the best ways to profit during a downturn. And
by using our scan conditions, coupled with the 10-Week SMA, we are identifying
those “low-hanging-fruit” opportunities I told you about.
Now that you understand how to run scans, and how to identify great trade
opportunities, let’s figure out how to manage the size of your trades responsibly…

Step 2 – Determine How Much Money To

Invest
Don’t worry – this is very easy to figure out, even if you aren’t so great at math.
Options can be confusing at times, but as long as you’re equipped with my Safe
Trade Options Formula, you won’t have to worry about putting too many eggs in
one basket.

Okay, so I'm going to go through the formula with an example of an account size
of $10,000. You might have a smaller account size, you might have a larger
account size, but I think you'll get the idea.

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The first thing we want to do is determine the percent of our account size we can
risk on one trade. Now, for smaller accounts like $10,000 and less, you can risk up
to 5% of your account size on any one trade. For accounts larger than that, up to
2%. For really large accounts, let's say over $100,000, up to 1%. Since our account
is $10,000 in this example, we'll use 5%.

So 5% of $10,000 is $500. That's the planned risk in your account balance. In
other words, if you lost on this trade, the most you would lose is $500. You're not
going to win on every trade, so you've got to plan accordingly.

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Next, we need to determine how many option contracts can you buy. Well, it
depends now on the price of option. Let's say the price of the option is $2. Since
each option controls 100 shares of a stock or ETF, you multiply that by 100 and
that's your cost per option contract: $200.

If your planned risk is a maximum of $500, you divide the $200 into $500, and you
get 2.5. But since you can't trade in fractions of a contract, you always round
down. In this example, the maximum number of contracts you can trade is 2.
Now that doesn't sound like a lot, especially to beginning traders. They say, "Well,
gee. With a $10,000 account I can buy more than $500 worth of option contracts.
I could buy 10 of them. I could buy even more."
That's when you start to get into big trouble, because you've got to plan for risk
first and then go after profits. There's no need to go after home runs. There's
plenty of opportunity, and you're going to win over a series of trades if you use
this formula with a good trading method.
Just be patient and be prudent in the amount of risk you take, and you'll never get
into trouble.
And when it does come time to close out some trades, you can use this extremely
simple (but highly effective) rule to figure out when it’s time to sell, in the final
step…

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Step 3 – Take Your Profits Or Move On
With every great trading technique, therein lies an even better exit strategy. If
you aren’t able to clearly define when you should be exiting trades (both winners
AND losers), you really hurt your chances of success with options trading.
In this case, our exit rule is very easy to follow – and leaves no wiggle-room for
human error. It has been back-tested over years of data, thousands of trades, and
yes – even in a crashing market.
So here it is:
Any put options trade made during a market trending downwards should be
sold when it makes an 80% gain or a 40% loss.
Due to the volatile nature of the stocks you’ll identify with the Profit Scanner
(remember, they all have a high Beta), coupled with the volatility of 1 and 2-strike
put options, you could see some significant movement in the value of the put
options you trade.
Because of this, we use a wide-range exit rule to keep us in the fight so long as the
stock is showing promise of plummeting during a crash. We’ve found, though,
that historically you’re better off just taking a loss if your put option ends up
losing 40% of its original value.
Alternatively, we’ve also seen that the best time to get out of a winning trade
(which we’ve increased the odds of getting with our Profit Scanner and 10-week
SMA rule) is when it’s gone up roughly 80%. At this point, stocks and ETFs will
often bounce back sharply in the opposite direction – wiping out some of your
profits in the process.
And even though you will endure some losing trades from time-to-time, in the
end this exit strategy will protect you from letting the bad trades consume your
portfolio, while allowing the winning trades to flourish.

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Conclusion
I hope you’ve enjoyed reading about the 3 Steps To Profiting From A Crashing
Market, and learned the finely-tuned process that successful traders use to stuff
their wallets – even in the midst of a full blown crash.
Many of the so called “experts” out there love picking stocks and ETFs out of a
hat, telling wide-eyed investors that even in turbulent times, their picks will
endure any conditions the market presents.
In effect, they’re just giving out random advice – guessing at which stocks will
prosper, and which will flounder, regardless of what the stock market is doing.
To quote the ancient Chinese proverb, analysts that do this are (in my opinion)
just “giving a man a fish to feed him for a day.”
In this guide, I wanted to try something different. Instead of throwing a bunch of
stocks against the wall to see which ones stick, we learned about what successful
traders do every day to win consistently in down markets.
In this guide, I didn’t want to just hand out fish like everyone else…
I wanted to teach people how to go out and do some fishing of their own.
So, as the market approaches its next inevitable slump, keep this report handy –
because I know it’ll help you catch a few more fish than the other guy.
And isn’t that what trading’s all about?

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