How to Make Money in a Down Market

Just because the stock market is down--doesn't mean you can't make money in it. There are possibilities. In this article we will explore some.
INSTRUCTIONS:
Step 1
One of the best things you can do when the chips are down in the market is to start writing covered calls to generate yourself some cash income. It won't allow you to totally recoup your losses, but it will give you some padding in your portfolio. When you write a covered call, you give the call buyer the right to purchase the stock that you already own at a preset price, known as the call price--a price that is always above the current market price.
Step2
The call buyer pays you a premium for the right to buy the stock at the call price. The call buyer does this because he or she thinks that the price of the stock will rise, whereas you will always choose a price that you think the stock will not reach before the option expires. But even conservative covered call writing can generate you hundreds or even thousands of dollars in premiums each year.
Step3
Remember, the farther away from the market price you are, the lower your risk--and the premium that you will be paid. The downside is that if your stock rises to the strike price--then you will be called out--and will have to sell the stock to the call buyer at that strike price--even if the market price has gone much higher.
Step4
Also keep in mind that you can only write covered calls on round lots of stock that you already own. But if the price of the stock begins to approach your strike price--you can close out your position and rewrite your calls at a higher strike price.