Lessons from the Russell 2000 & Protecting Your Downside

[] Tips for staying safe in today’s market [] [] [] [] In my last post, we talked about the recent market swings and how they've impacted the S&P 500. If you missed that, [you can read it here](. Today, I want to dive a bit deeper into what’s been going on and share some insights on how to navigate these choppy waters. Today, we'll dive deeper into how the market’s recent volatility, especially in the Russell 2000, can give us hints about what’s happening more broadly in the economy and a strategy you can adopt to protect your downside. What’s Going On with the Russell 2000? Let’s start with the Russell 2000. For those who might not know, the Russell 2000 is an index that tracks the performance of 2,000 small-cap companies in the U.S. These smaller companies are often more sensitive to changes in the economy than their larger counterparts, which makes the Russell a good gauge of how the US economy is doing. Just yesterday, the Russell 2000 had a big drop and went negative for the year, and that’s something worth paying attention to. When small-cap stocks are struggling, it can be a sign that economic growth is slowing. But here's the thing: while this might sound alarming, it also opens up some opportunities. Just look at the bounce today for evidence of that. The key takeaway is that is that if small caps are struggling, they make up a huge base of employers in the US, so a lot of layoffs from small caps could both be a sign of and help kickstart a wider economic downturn. A lot of the market’s current jitters are tied to economic indicators, like Friday’s weaker-than-expected jobs report and the Fed's chatter about interest rates. Going forward, it’ll be key to keep an eye on what developments we see out of these. Protecting Your Downside One thing I like to do — and if you follow Tom Busby, he does this as well — is to buy what I call “pocket puts”. I’ll go out looking for out-of-the-money puts expiring 3 to 4 months from now that I can pick up for about $1. And when you have something like what happened yesterday, those puts can end up making you a ton of money. But you have to be aware: Buying puts like this is like buying insurance. It’s the kind of thing you spend real money on in the hopes that you’ll never have to use it. Lots of times, just like with car insurance or what have you, you’ll pay your premium and never use that insurance. So you have to get comfortable with spending money on something that you might not use. But again, when days like yesterday happen, those will pay out handsomely. Going Forward The key thing to know is that markets generally overreact to everything. Just look at the bounce we had since yesterday. What I’d be looking at going forward are opportunities to buy. I’ll talk more about that tomorrow. — Geof Smith P.S. Have you seen my [Oklahoma Trade]( It’s a brand-new strategy I’ve developed to target weekly income from one of the most rock-solid assets out there. This kind of thing is perfect in all markets, but especially when we see volatility like we’ve seen recently. [Check it out here](. [] [] In my last post, we talked about the recent market swings and how they've impacted the S&P 500. If you missed that, [you can read it here](. Today, I want to dive a bit deeper into what’s been going on and share some insights on how to navigate these choppy waters. Today, we'll dive deeper into how the market’s recent volatility, especially in the Russell 2000, can give us hints about what’s happening more broadly in the economy and a strategy you can adopt to protect your downside. What’s Going On with the Russell 2000? Let’s start with the Russell 2000. For those who might not know, the Russell 2000 is an index that tracks the performance of 2,000 small-cap companies in the U.S. These smaller companies are often more sensitive to changes in the economy than their larger counterparts, which makes the Russell a good gauge of how the US economy is doing. Just yesterday, the Russell 2000 had a big drop and went negative for the year, and that’s something worth paying attention to. When small-cap stocks are struggling, it can be a sign that economic growth is slowing. But here's the thing: while this might sound alarming, it also opens up some opportunities. Just look at the bounce today for evidence of that. The key takeaway is that is that if small caps are struggling, they make up a huge base of employers in the US, so a lot of layoffs from small caps could both be a sign of and help kickstart a wider economic downturn. A lot of the market’s current jitters are tied to economic indicators, like Friday’s weaker-than-expected jobs report and the Fed's chatter about interest rates. Going forward, it’ll be key to keep an eye on what developments we see out of these. Protecting Your Downside One thing I like to do — and if you follow Tom Busby, he does this as well — is to buy what I call “pocket puts”. I’ll go out looking for out-of-the-money puts expiring 3 to 4 months from now that I can pick up for about $1. And when you have something like what happened yesterday, those puts can end up making you a ton of money. But you have to be aware: Buying puts like this is like buying insurance. It’s the kind of thing you spend real money on in the hopes that you’ll never have to use it. Lots of times, just like with car insurance or what have you, you’ll pay your premium and never use that insurance. So you have to get comfortable with spending money on something that you might not use. But again, when days like yesterday happen, those will pay out handsomely. Going Forward The key thing to know is that markets generally overreact to everything. Just look at the bounce we had since yesterday. What I’d be looking at going forward are opportunities to buy. I’ll talk more about that tomorrow. — Geof Smith P.S. Have you seen my [Oklahoma Trade]( It’s a brand-new strategy I’ve developed to target weekly income from one of the most rock-solid assets out there. This kind of thing is perfect in all markets, but especially when we see volatility like we’ve seen recently. [Check it out here](. [] ABOUT US: We believe that the opportunity for financial literacy and freedom belongs to all people, not just those who already have years of investing experience. Prosperity Pub provides an array of educational services and products that will help you navigate the markets and become a better investor. Trading is made simple through our online forum full of trading techniques to give you the best tools to kick-start your investing journey. We offer collaborative webinars and training; we love to teach. No matter the opportunity, we bring together a strong community of like-minded traders to focus on analyzing market news as it’s presented each day. DISCLAIMER: FOR INFORMATION PURPOSES ONLY. The materials presented from Prosperity Pub are for your informational purposes only. Neither Prosperity Pub nor its employees offer investment, legal or tax advice of any kind, and the analysis displayed with various tools does not constitute investment, legal or tax advice and should not be interpreted as such. Using the data and analysis contained in the materials for reasons other than the informational purposes intended is at the user’s own risk. DISCLAIMER: TRADE AT YOUR OWN RISK; TRADING INVOLVES RISK OF LOSS; SEEK PROFESSIONAL ADVICE. Prosperity Pub is not responsible for any losses that may occur from transactions effected based upon information or analysis contained in the presented. To the extent that you make use of the concepts with the presentation material, you are solely responsible for the applicable trading or investment decision. Trading activity, including options transactions, can involve the risk of loss, so use caution when entering any option transaction. You trade at your own risk, and it is recommended you consult with a financial advisor for investment, legal or tax advice relating to options transactions. Please visit [( for our full Terms and Conditions. [Unsubscribe]( This email was sent to {EMAIL} by Prosperity Pub 101 Marketside Ave, Suite 404 PMB 318, Ponte Vedra, Florida 32081, United States [Prosperity Pub]( [] ABOUT US: We believe that the opportunity for financial literacy and freedom belongs to all people, not just those who already have years of investing experience. Prosperity Pub provides an array of educational services and products that will help you navigate the markets and become a better investor. Trading is made simple through our online forum full of trading techniques to give you the best tools to kick-start your investing journey. We offer collaborative webinars and training; we love to teach. No matter the opportunity, we bring together a strong community of like-minded traders to focus on analyzing market news as it’s presented each day. DISCLAIMER: FOR INFORMATION PURPOSES ONLY. The materials presented from Prosperity Pub are for your informational purposes only. Neither Prosperity Pub nor its employees offer investment, legal or tax advice of any kind, and the analysis displayed with various tools does not constitute investment, legal or tax advice and should not be interpreted as such. Using the data and analysis contained in the materials for reasons other than the informational purposes intended is at the user’s own risk. DISCLAIMER: TRADE AT YOUR OWN RISK; TRADING INVOLVES RISK OF LOSS; SEEK PROFESSIONAL ADVICE. Prosperity Pub is not responsible for any losses that may occur from transactions effected based upon information or analysis contained in the presented. To the extent that you make use of the concepts with the presentation material, you are solely responsible for the applicable trading or investment decision. Trading activity, including options transactions, can involve the risk of loss, so use caution when entering any option transaction. You trade at your own risk, and it is recommended you consult with a financial advisor for investment, legal or tax advice relating to options transactions. Please visit [( for our full Terms and Conditions. [Unsubscribe]( This email was sent to {EMAIL} by Prosperity Pub 101 Marketside Ave, Suite 404 PMB 318, Ponte Vedra, Florida 32081, United States [Prosperity Pub](