Ross Cameron's Strategy For Using Options To Combat Market Volatility

This special presentation from Ross Cameron is from Benzinga's first-ever virtual Benzinga Options Boot Camp on Saturday, April 18. Check back with Benzinga for more coverage of this all-day event with options trading experts who are giving traders of all experience levels real, dependable strategies for hitting the ground running or expanding an existing portfolio. 

In late February, financial markets began a historic sell-off alongside the COVID-19 pandemic. 

Ross Cameron, the founder of Warrior Trading, a trading room and education community, said he leveraged his years of experience to successfully trade securities such as the Direxion Daily S&P 500 Bull 3X SPXL, Direxion Daily S&P 500 Bear 3X SPXS, ProShares Short VIX Short Term SVXY, Moderna Inc MRNA, Blue Apron Holdings Inc APRN, Delta Air Lines Inc DAL and Direxion Daily Junior Gold Mine JNUG.

During the Benzinga Options Boot Camp, Cameron broke down the strategies that he said  allowed him to navigate market turmoil — and make $44,000.

“That’s not something you probably see every day. Results are not typical,” Cameron said. “I want to inspire you and challenge you to begin your own small account challenge.”

Cameron's Baby Steps

A major step toward Cameron's profitability involved getting a feel for the market, he said. 

“I say all the time now to my beginner students that you have no business trading with real money until you have first proven you can be profitable in a simulator.”

The next milestone is understanding the concept of losing less money than you make, Cameron said. 

“What most traders end up doing without realizing it is trading with a negative profit-loss ratio, which means their average losers are often two or even three times the size of their average profit. That’s a very difficult metric to overcome and be profitable in spite of."

Cameron focuses on setting the bar low, encouraging traders to adopt a profit-loss ratio of 2-to-1 when starting out.

“If you had that profit-loss ratio, you only need to be right 33% of the time in order to break even.”

Cameron On Executing On Opportunity

“Rather than be a jack of all trades, you want to find one strategy that you can really master,” the Warrior Trading founder said. 

During the 2020 market crash, Cameron said he's focused on the S&P 500 and VIX indices. While trading, Cameron noticed that the two major products would diverge and prove difficult to trade together. That’s when Cameron looked to leveraged and inverse ETFs.

Additionally, Cameron said he looks at how options can be used to diversify trading income and reduce the volatility of portfolio returns.

“There are a million option strategies to learn,” Cameron said. “I prefer selling a naked put that’s cash covered. It’s good for generating a bit of premium on an account where you have a retirement type focus, where you’re genuinely okay with buying some long term positions.”

Cameron On Maintaining Composure

Cameron's discussion ended with a talk about minimizing losses and focusing on the opportunity that lies ahead.

“Sometimes I’ll have a loss on a stock one day and then, a couple of days later, it’s back up and I can have another opportunity to trade it,” he said.

“Set realistic goals and be willing to walk away, knowing that every single day, you’re either leaving on the table or giving back profit. I prefer to give away profit.”

Photo courtesy of Warrior Trading.