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The recent correlated sell-off in most markets has provided somewhat of nowhere to hide for investors. With bond yields rising (i.e prices falling), we’ve also seen equity markets move lower, along with previous metals. With traditional correlations breaking down, here are three trade ideas that we like for a market crash.

Cheap topside options

Trying to pick a bottom and buy an index or a stock perfectly in this environment is almost impossible. Therefore, long dated call options can be a nicer way to play a recover you believe in. Even though the theta (the time option value) makes a longer dated option more expensive to buy, this can be offset via buying a strike well out of the money.

For example, with Tesla shares now at $740. Call options around $800 or even $900 will be expensive. Yet picking up strikes around $1,100 or $1,200 are much cheaper. Even if the price doesn’t reach this level before expiry, if the market does take a shift higher, the option could still be sold for a potential profit before expiry.

We do note that options are complex derivatives and should only be traded by those that have knowledge and experience in this field.

Taking cross asset exposure

Another idea we like at the moment is to try and get as much cross asset exposure as possible. For example, we hold Rio Tinto in our Etoro portfolio for exposure both to stocks and also to oil. Another example would be owning Coinbase shares for exposure to crypto and stocks.

In this way, we can spread our risk as far as possible to diversify ourselves. We also like crypto’s that have a utility value. For example, we recently wrote about STEPN, a play to earn project behind GST coin. By earning GST through the game, we further diversify our holdings as we earn without having to stump up fresh cash. This leaves our cash (as another valid asset class) on hand.

Making use of the pros

Finally, we like buying stocks that make use of professional money manages. For example, the Scottish Mortgage Investment Trust or Pershing Square are two in the FTSE 100. These stocks are essentially the sum of a group of stocks, and should trade close to the net asset value of all of them combined.

We like these type of stocks at the moment as these money managers have access to enhanced research and products that can help them to outperform retail investors. This becomes even more valuable during periods of crisis.

AlphaPicks owns shares in Rio Tinto. To buy crypto and shares, register here with our preferred partner, EToro.

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