Embrace the Panic: Profiting from Absurd Limit Orders

By Joseph Zappia, Co-Chief Investment Officer, LVW Advisors
The stock market is currently on a roll, characterized by the S&P 500 notching 46 new all-time highs as of this writing. It might seem counterintuitive to discuss investment strategies tailored for volatility and market turmoil. However, history has shown us that stock markets can shift unexpectedly, making it crucial to have a plan in place for when times get tough. In this post, we’ll explore a strategy designed for more turbulent markets. By evaluating different tactics now, you can position yourself to navigate future uncertainties with confidence.

Investing in the stock market can sometimes feel like a game, especially when you’re eyeing those quality stocks that seem just out of reach. Did you miss Amazon, Netflix, Nvidia or Chipotle?

One intriguing strategy outlined by Joshua Brown in his new book, You Weren’t Supposed to See That, is to consider placing absurd limit orders on stocks you’ve always wanted to own but don’t yet have in your portfolio. Here’s how this unconventional approach can turn market downturns into exciting opportunities.

The GTC Limit Order Strategy

A Good ‘Til Canceled (GTC) limit order allows you to set a buy price for a stock and keep it open until it’s filled or you decide to cancel it. By setting these orders at prices that seem absurdly low, you position yourself to potentially acquire high-quality stocks at bargain prices during unexpected market drops.

Why It Works

Shift in Focus:
When the market is tanking, instead of succumbing to panic, your attention shifts to the possibility of snagging a coveted stock at an unbelievable price. This shift can be both thrilling and distracting, helping you manage anxiety during volatile times.

Emotional Detachment:
The excitement of potentially hitting the bottom on a major stock, like Facebook, can overpower concerns about the broader market drop. It’s almost like rooting for more downside because it increases your chances of getting “hit” on your limit order.

A Story to Tell:
Imagine the satisfaction of telling your friends, “I nailed the bottom on that stock!” Beyond being a potential home run trade, it’s a story that reinforces your ability to navigate market panics.

Long-term Perspective:
Successfully executing such trades serves as a reminder of your resilience and ability to thrive during past market panics. It’s a confidence booster for future investing challenges.

Historical Context

Consider past market panics like the Brexit headlines or the yen carry trade sell-off. These events initially seemed catastrophic but turned out to be inconsequential in the long run. By placing GTC orders during times of market volatility, you might just catch those elusive stocks you’ve always wanted.

Conclusion

Playing this game of absurd limit orders requires patience and a bit of nerve, but it can be an effective way to turn market volatility into opportunity. You will need to ensure you have sufficient funds in your account to cover the orders, but go ahead and set those crazy prices before the market opens, and leave them alone. You never know when you might hit on one or two of the names, add a legendary trade to your investing storybook, and potentially make a lot of money.

What’s on your panic list?

Source:
Brown, Joshua M. You Weren’t Supposed to See That: Secrets Every Investor Should Know. 2024

This material is for informational purposes only. It is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy, or investment product. The information presented here is not specific to any individual’s personal circumstances. Opinions expressed herein are based on economic and market conditions at the time this material was written, and do not necessarily reflect the views of LVW Advisors. Economies and markets fluctuate. Actual economic or market events may turn out differently than anticipated. Any investment advice provided by LVW Advisors is client specific based on each client’s risk tolerance and investment objectives. An investment involves risk, including the risk of losing some or all of the investment capital.