Profit in a Market Correction and Investment Oppurtunities

       It's been a bad week for markets around the world. The U.S markets had there worst week since 2011, as the Dow fell 539 points including a 318 point drop on Friday. It appears as though the over due market correction has started. Now the question becomes how to make money as the stock market retreats from it's all time highs? The answer is buying up Put options on companies that have yet to fall with the rest of the market, one notable company is Microsoft, the best performing stock in the Dow on Friday. 

Microsoft corp-

       Microsoft was spared from the correction that consumed most of its fellow Dow components due to its good earnings announcement on Friday.

       Microsoft was up 2.08% on Friday, as the company announced Quarterly earnings of $24.52 billion in revenue (a rise of 14% from last year) and net income of $6.56 billion (above last years $6.38 billion) the company also made $.78 a share once again posting a higher number then last years $.76 and trumping estimates that predicted net earnings of $.68 a share. These better then expected quarterly earnings were achieved due to good sales of Microsofts X-box one game console and it's surface tablet.

       Microsoft might of been able to avoid Fridays drop but if the correction continues Microsoft will join the ranks of its fellow blue chips and watch its stock price fall. Microsoft shares have already fallen .26% in the premarket on Friday and I expect them to fall on Monday.

       So if you were one of the people who were hit hard by last weeks sell off (and believe me I was hit to) a good way to make up some of those losses is to buy put options on Microsoft, so when the market heads lower you could profit while your fellow traders lose.

Delta Airlines-

       Microsoft is the perfect company to bet against going into next week but one company that was hit hard during the sell off but you should hold off selling is Delta Airlines.

       Friday was maybe the worst day for the airline industry since August (when the Federal Government said it was suing to stop the American Airlines- U.S Airways merger). Due to a combination of the general market correction, weather related flight delays and cancellations major airlines including Delta, JetBlue,Southwest, and American all saw there stocks deflate.

Personally I am great fan of investing in Airlines, I have had success in investing in them before and as Fuel prices drop Airlines are becoming a strong and stable business, and I find this sell off an amazing opportunity in investing into them.

       Now I am not the first person to say this but Delta Airlines is arguably the best airline to invest into. With a large profit margin of nearly 10% and with its own refinery and did I mention the stock trades at just 2.5x earnings!

       Yes you read right, Delta trades at just 2.5x earnings, since the company posted 4th quarter profit of $13 a share, while the stock trades at just $31.11. Let me put this into perspective, the S&P 500 trades at a p/e ration of 15. If Delta was valued at the same evaluation the S&P 500 is that means the stock should trade at $186.66 a share. Now I am a realist, I know that it's unlikely Delta airlines will see its stock increase 6 fold, but it is a very real possibility this stock will double in the upcoming year.

       Personally I bought stock and call options on Delta on Thursday when the stock was down 1.09%, I figured that Delta stock would bounce back.....how wrong I was, Delta shares fell 4.28% dealing me a heavy hit. But I am not selling my stock, in fact I plan on buying more.

I Believe Delta Airlines is the buy of the year, and with the market correction putting pressure on the stock there is no better time to buy then now.

      But how about the rest of the stock market? As January unfolds many feel as though 2014 will be the year of the bear. The last week has reinforced that opinion, but if you assess Friday's trading day you will see that the orders to sell are coming from small individual investors.

       Hedge Funds and Mutual Funds are not rushing to sell there investments. And why not? Because the managers of these firms know that this is not a panic but an orderly retreat. The correction that has been awaited for a long time has finally arrived and it might send the markets down another 2-3% but in the long term it is a good thing.

       Once this correction occurs there will be bargains and investors could go shopping for opportunities and the stock market will continue its march upwards. So if you got burned on the market this week do not despair, panic and sell your investments. Instead wait it out, or buy some put options betting against the market where you could get some short term profit and nullify your losses. Also I would suggest to liquidate a piece of your portfolio so when the market bottoms out you have cash on hand to exploit the opportunities the sell off presents




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