Jeff Clark’s “rubber band” trading strategy… the limitations of buy-and-hold… what if 2025 is a go-nowhere market? … historic volatility this year … tomorrow’s trading event with Jeff
In November 2023, Beyond (BYON) – the owner of the failed brand Bed Bath & Beyond – was sucking wind.
Here’s master trader Jeff Clark:
[BYON had] spent the previous three months in a free fall. It plummeted from nearly $38 a share in August to about $16 a share.
In other words, Beyond was completely out of its normal range.
While bruised buy-and-hold investors were throwing in the towel, Jeff recognized the fingerprints of a trading set-up that’s served him well over his four decades in the market – an oversold, mean reversion rally.
You might think of it as a “rubber band” trading strategy.
Imagine a rubber band being stretched to the edge of its elastic limits. When released, it zooms across the room in the opposite direction of the pullback.
Similarly, when a stock’s price moves too far away from where it historically trades (whether high or low), often, it’ll snap back toward its baseline. Well-positioned traders can pocket sizeable gains, many times in just a week or two…sometimes, in just a few days.
Returning to BYON, in November 2023, it was in the “deeply oversold” camp.
Here’s Jeff:
You’ll notice how the stock’s price line was way below its 50-day moving average trendline (blue line) over that time.
It was clear to me the stock was oversold and ready to snap higher.
Jeff recommended his subscribers place a bullish trade. Two weeks later, BYON was up 40%.
But that’s not what subscribers pocketed…
Given how Jeff structured the trade, subscribers could have made 329% (depending on their exact buy/sell timing)… in just 14 days.
This is why professional traders like Jeff run toward volatility while the average investor flees it
Most investors are programmed for “buy and hold.”
That’s great when markets are marching upward, but in turbulent times these investors are strapped into a roller coaster – you ride it down, but with nothing to show for it at the bottom.
Investors who understand how to trade volatility, however, can lock in gains both on the way up – and down.
One of the greatest examples of this on a macro level came in early 2020 when billionaire hedge‑fund manager Bill Ackman recognized that the Covid pandemic would spark a market panic.
He warned “Hell is coming,” pivoted into credit‑default swaps, and pulled in a stunning $2.6 billion in profits in just three weeks – all while the rest of the market was in panic mode, throwing in the towel. He then dumped those profits into long positions and made a killing as stocks rebounded.
But you don’t have to be a billionaire hedge fund manager to trade this way. Jeff uses a strategy he’s honed over his decades in the market, refined by thousands of winning trades:
- Find market set-ups where the selling or buying pressure has reached an extreme…
- Wait for technical indicators to suggest those extremes are about to ease (i.e., the rubber band is about to snap back) …
- Place a bet using a reasonable position size that doesn’t leave you overextended
In recent weeks, this same mean-reversion strategy that made the BYON trade a winner has resulted in a slew of additional profitable trades.
To illustrate, here are the trades Jeff recommended at his live trading blog, Delta Direct, going back to the end of March.
In addition to the sea of green, notice the bi-directional nature of the trades, the size of the returns, and how quickly Jeff is in and out of the market.
If we’re long-only investors, we can only hope for the market to go up. But if we can trade both directions – especially in short time frames – we’re no longer hoping, we’re preparing.
We’re building dry powder to take advantage of market “sales” when the crowd panics.
What if the back half of 2025 is like the first half?
Rewind to December 2024.
The Trump Trade was soaring… Wall Street was giddy on expectations of tax cuts and deregulation… and being bearish seemed naïve at best and outright financially negligent at worst.
But here we are, approaching the halfway point of the year, and not only hasn’t the S&P soared, but it’s barely 2% higher.
But something else has soared this year…
Volatility.
As of May, the VIX – the S&P 500’s 30-day “fear gauge” – was averaging 27.5, firmly above the long-term norm (~19–20). Usually, that level of volatility is only seen during major market shocks.
And it’s not a minor bump: in April, the VIX shot into the mid-50s as millions of SPX options exploded in daily volume – with realized volatility over 43%, the highest since 2020.
But then, the “rubber band” snapped back. As you can see below, the CBOE Volatility Index has plummeted 63% over the last nine weeks – one of the most dramatic volatility crushes in history.
If you’re less familiar with these terms, the takeaway is simple…
No, it’s not in your head; this year has been dramatically more volatile than prior years.
Before we know it, December will be here
And what if, for all the market’s upcoming rising and falling, the S&P is up only another 2% by then?
What if it’s down 2%, after a six-month run of violent price swings?
If you’re a buy-and-hold investor, such a flat outcome and string of turbulent months will be frustrating, to say the least, as profitable opportunities go into hiding.
But for those tuned into short-term moves, opportunity will be everywhere.
Back to Jeff:
I don’t see volatility ending any time soon.
There are many reasons for this.
We live in a world where a single social media post from the administration can send the markets into a frenzy…
We’ve got economic and trade policies being proposed and implemented that are completely different from decades past…
And we have a reordering of the global economy which could keep markets volatile for years to come…
If you think it’s smooth sailing ahead, I have a bridge to sell you.
But whereas when most people see volatility, they panic, I see dollar signs – a lot of them.
It’s these violent swings that allow us traders to potentially make HUGE profits in just a handful of days.
Tomorrow at 10 a.m. ET, Jeff is hosting a presentation that dives into how to generate fast trading profits in volatile markets – in both directions
He’ll dive into additional detail on mean reversion strategies… what he expects is in store for the markets over the coming weeks… 10 compelling trade opportunities that he sees right now… and a powerful trading tool he’s built with our partner, TradeSmith.
As I noted in yesterday’s Digest, we’re fans of Jeff’s short-term trading approach. Being able to capitalize on volatility provides a great way to generate cash flows. Maybe you choose to funnel them into your high-conviction buy-and-hold picks… or perhaps you pay bills or even fund a vacation.
Join Jeff tomorrow at 10 a.m. for more nuts and bolts on how to do it. You can register right here.
Here’s Jeff to take us out:
If your goal is not only to survive all this volatility but profit from it, you need an approach to building wealth that isn’t purely about buying and holding stocks for the long term.
That’s why tomorrow at 10 am ET, I’m hosting a special briefing about how you can profit using my favorite strategy.
It’s free to attend. All I ask is that you register in advance right here.
Have a good evening,
Jeff Remsburg
