DIA Bear Put Spread: Potential 100% Return in Market Downturn

The way people feel about the stock market has changed. Before, they liked to buy whenever prices dropped (bullish). Now, they prefer to sell whenever prices go up (bearish).

This change affects all the main stock market measures. One of them is the Dow Jones Industrial Average, which might have its first month of losses after five months of gains. An ETF called SPDR Dow Jones Industrial Average ETF Trust (DIA), which follows the Dow, shows this change with its moving averages.

When the 10-day moving average goes below the 21-day moving average, it suggests a possible bearish trend, similar to what happened in the past.

To Profit from DIA Going Down

Because the market is changing, a strategy called a bear put spread is suggested to make money from the DIA ETF going down.

DIA Bear Put Spread: Potential 100% Return in Market Downturn
ETF Exchange Traded Fund (Credits: iStock)

This strategy involves buying a put option for $383 and at the same time selling another put option for $382, both expiring on May 17th.

It costs $50 per contract to do this trade, but it could give a 100% return on investment if DIA drops to $382 or lower by the expiration date. This plan is a way to deal with the current market situation while keeping the risks under control.

Important Things Coming Up in the Market

Some big events are coming soon that could affect the market a lot. These include earnings reports from major companies like Amazon and Apple, and also a decision from the Federal Reserve about interest rates.

(Credits: iStock)

Traders need to have a good plan to manage risks this week, especially with these events coming up. Because these events might make the market more volatile, investors must stay informed and ready.

More Money in Short-Term Options

The options market is seeing a lot of activity, especially in short-term options that expire on the same day they’re traded (0DTE options).

In April, the value of these contracts tied to the S&P 500 hit a record high of around $862 billion, which is a 74% increase from last year. This surge in trading, partly because of higher S&P 500 prices, shows that more people are interested in these kinds of investments.

But it also shows that there’s a lot of money being bet on short-term moves in the market, which can be risky.

Michael Manua
Michael Manua
Michael, a seasoned market news expert with 29 years of experience, offers unparalleled insights into financial markets. At 61, he has a track record of providing accurate, impactful analyses, making him a trusted voice in financial journalism.
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