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You ride the bull market through stage 6. Again you want to be a contrarian and take your profits before the blow-off top. It’s time to remember again that “bears win, bulls win, but hogs get slaughtered!” Many traders, after successfully making profits in stages 3, 4, and 5, hold out to pick the top. This is a very dangerous strategy. As mentioned earlier, the market usually declines substantially faster than it rises. Those who wait are often disappointed. Options trading is risky business.

When the blow-off top begins, you again do the opposite of what most traders are trying to do. Instead of getting in the market long, you’re looking for a put that is reasonably priced with enough time to take advantage of the impending bear market.