How to Make Money in the Falling Financial Sectors

If there were ever an opportunity to capitalize on the misfortunes of the financial markets, now is the perfect time to do it. The S&P 500 ETF, (SPY) has broken through a very important support and it is not inconceivable for it to travel clear down to the 1000 region in a continuous freefall.

The conflict in Europe is helping create this situation. World stocks hit a new 15-month low on fears of the major banking crisis. There is a great fear that Greece will default and this will ad to the woes of the global economy as well as the demise of the already fragile banking sector in Europe. The default has yet to be priced into the markets.

This is causing banks in Europe to freefall. Monday they lost 10% and Tuesday some dropped as much as 37%. Banks in Berlin are expected to have to continue to pay out the weaker elements of the euro trading zone. This will raise insurance costs greatly that deal with protecting German debt against default.

Eventually this will hit the US Financial market, sending it even lower for a period of time and there is no reason a savvy investor cannot make money in the financial markets.

While the financial markets tumble, the Direxion Russell 1000 Financials Bearish 3X ETF (FAZ) is capitalizing on the downturn. FAZ seeks daily investments results of 300% the inverse price of the Russell1000 Financial Service Index. Investors are turning more and more to this fund to make money.

FAZ had an increase in volume from August through September of 28.6%. Simple market sense will tell you, where investors are going and demand is high, prices rise. Notice the increase in interest through the beginning of October in the FAZ. Since it looks like we may have a few more weeks of this chaos in the financial markets, options are a good way to capitalize using FAZ as a sounding board for bullish options strategies.

If one believes the stock will continue to rise but would like to protect one's self against a short-term reprieve in the financial markets, where an upturn takes place before we continue down, here is a quick strategy for those who have $75,000 they are looking to do something with. Buy 1000 shares of FAZ at $74.80 each. Go out three weeks and sell 10 October ‘72' monthly puts at 11.57 each.

This will give you a nice income and if the stock drops in the next three weeks below your ‘72' level, you will be able to sell your stock of for '72.' You still come out profitable. If the financial markets continue to fall, you have created an income while the value of your stock continues to rise.