Flip A Strategy For Quick Trading

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Flip: A Strategy For Quick Trading

A flip generally refers to a dramatic directional change in the positioning of investments. Depending on the kind of investment, the word can have different meanings. At least four different examples exist using this term including: technical trading, real-estate investment, IPO investing and professional fund management.

Key Takeaways

  • Flip is a term that can have multiple meanings in the investment world.
  • Technical traders may flip direction and change their trades based on price action.
  • Real estate investors may flip a house after owning it a short time.
  • IPO investors may buy a new stock shortly after issuance and hope to sell it at substantial gain in a relatively short period.
  • Macro fund investors may flip from one asset class to another based on rising evidence of secular trend change.

Understanding a Flip

A flip can be an effective way to generate profits from a new technical trend. Often, the notion of a flip is thought of as a short-term strategy, but this is not necessarily the case.

Technical Trading

In technical trading an investor can flip their position from net long to net short or vice versa based on price action. They might do this to benefit from a new trend, but the duration of that trend may only last a couple weeks or over a year depending on the trader and their strategies.

In a net long, to net short flip an investor could sell put options at various strike prices on their underlying holdings to benefit from falling prices. In the opposite scenario, an investor would increase their long positions in a security betting on price increases. These strategies allow traders to profit from price reversals occurring from a security investment over time.

In technical trading, it is commonly known as a shift from having more long positions to having more short positions, or vice versa.

Real Estate Investment

Broadly, the term flip can also refer to a real estate investing strategy in which the investor may acquire or control assets for a short time, add improvement of some kind to the assets, and then sell, or flip, the assets for a profit.

In residential house flipping, an investor attempts to buy a home at the lowest possible price. This investor often has the intention and the ability to renovate the home to increase its value. After renovations are complete, the investor relists the home for a higher price and sells it, retaining the difference for a profit.

Flipping IPOs for Quick Profits

IPO investing has a similar dynamic. An investor buys a security at what they expect is the best IPO price, whether before, at, or sometime after the actual IPO sale announcement, but when the buyer sells it depends on the kind of investment strategy and philosophy they have. Company owners expect to be able to hold on to their pre-IPO-issued shares, and have no plan to sell quickly. Usually they expect to build the share value substantially over a period of years.

But others who were not able to buy as company insiders or accredited investors instead look for the fastest period of appreciation they can get from their investments. These investors may specifically try to buy an IPO stock as low as they can and hold it until the stock has increased by 40 to 50 percent or more in a matter of weeks or months. They take profit and look for the next IPO to flip.

Investment Management

In macro funds that seek to follow broad market trends, flipping may also occasionally be used. If a macro fund manager believes potential losses are high in a certain sector they may choose to flip those assets to a more profitable sector. This type of flipping can also be used by investors who take a macroeconomic approach to managing their portfolios. Flipping from at risk sectors to sectors with greater return opportunities can be important in mitigating certain systemic or idiosyncratic risks.

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Flipper

What Is a Flipper?

A flipper describes an investor who buys a stock, often at an IPO, in order sell it for a quick profit. A flipper may also refer to a somebody who buys and sells homes or properties for quick profits, often after refurbishing them.

Flipping, whether in stocks or real estate, is highly speculative and is often frowned upon by regulators.

Key Takeaways

  • A flipper, generally, is somebody who purchases an asset or investment for a very short period of time, hoping for a quick profit.
  • In stocks, flipping is most associated with IPOs, whereby buyers at the IPO price turn around and sell it on its first days of trading, hopefully at a higher price, in the stock market.
  • Real estate flipping involves purchasing properties, often to renovate, and re-sell them, often in a period of a year or less.

Flipping Properties

Understanding Flippers

Stock flippers may hold a stock for as little as 24-48 hours, and they are therefore exposed to short-term upturns and downturns in the market. Unlike long-term investors, who typically ignore short-term ups and downs in the market, these short-term investors depend on these sudden market shifts to make their profits. With IPOs, it is institutional investors who are most often given the chance to purchase shares, and often they engage in flipping.

Because of the risk of flipping by company insiders, IPOs will restrict company owners and early investors from selling their shares until a lock-up period has transpired, often several weeks or months following the IPO date.

Real estate flippers often buy rundown homes at low prices and renovate them in order to sell them at much higher prices. Typically flippers face a host of challenges. These include problems with borrowing, insurance, renovations, inspections and market conditions. All of these present hazards that can make profitability a challenge unless skillfully managed.

Risks of Real Estate Flipping

Flipping is most strongly associated with real estate, where it refers to a strategy of purchasing properties and selling them on a short time frame (generally less than a year) for a profit. In real estate, flipping usually falls into one of two types. The first type is where real estate investors target properties that are in a rapidly appreciating market and resell with little or no additional investment in the physical property. This is a play on the market conditions rather than the property itself. The second type is a quick fix flip where a real estate investor uses his knowledge of what buyers want to improve undervalued properties with renovations and/or cosmetic changes, known as a reno flip.

Flipping has made fortunes in real estate, but it does seem to spawn more infomercials than it does easily replicated results. Flipping in a hot market is the riskier of the two, as hot markets can cool unexpectedly. If market conditions change before the property can be sold, then the real estate investor is left holding a depreciating asset. Flipping after improving an undervalued property is less dependent on market timing, but market conditions can still play a role.

In the reno flip, the investor makes an additional capital infusion into the investment that should increase the property value by more than the combined cost of the purchase, the renovations, the carrying costs during the reno and the closing costs. Although flipping sounds simple and straightforward in principle, it does require more than a casual understanding of real estate to be done profitably.

Flipping and Wholesaling

Depending on your perspective, real estate flipping can also encompass wholesaling. In wholesaling, a person with an eye for undervalued (and therefore flippable) real estate enters into a contract to buy a property subject to an inspection period and then sells the rights of the contract to a real estate investor for a fee or percentage. This is a more formalized relationship than with a traditional bird dog, and the property in question may or may not be flipped by the eventual buyer. A wholesaler is not limited to looking at properties solely for the purpose of flipping. Wholesalers also scout income properties and longer term appreciation plays for real estate investors.

7 Quick Ways to Make Money Investing $1,000

Grow Your Business, Not Your Inbox

If you’re sitting on at least $1,000 and it’s scratching an itch in your pocket, consider investing it rather than spending it on something frivolous. But the question that then beckons us is: Can you really make money quickly investing with just $1,000?

The answer to that is a resounding, “Yes.”

While there are plenty of ways you can make money fast by doing odd jobs or generating it through things like affiliate marketing or email marketing, actually making money by investing with just $1,000 might present more challenges, and frankly, more risks. That is, of course, unless you know what you’re doing.

However, all risks aside, even if you’re living paycheck-to-paycheck, you still may be able to conjure up $1,000 to put towards an investment if you’re creative.

Before you dive in, there are some mindset principles that you need to adhere to. Moving beyond the scarcity mentality is crucial. Too many of us live our lives with the notion that there’s never enough of things to go around — that we don’t have enough time, money, connections or opportunities to grow and live life at a higher level.

That’s just a belief system. Think and you shall become. If you think you can’t get rich or even make a sizable amount of money by investing it into lucrative short-term investment vehicles, then it’s much more of a mindset issue than anything else. You don’t need to invest a lot of money with any of the following strategies.

Sure, having more money to invest would be ideal. But it’s not necessary. As long as you can identify the right strategy that works for you, all you need to do is scale. It’s similar to building an offer online, identifying the right conversion rate through optimization, then scaling that out. If you know you can invest a dollar and make two dollars, you’ll continue to invest a dollar.

Start small. Try different methods. Track and analyze your results. Don’t get so caught up on how you’re going to get wildly rich overnight. That won’t happen. But if you can leverage one of the following methods to make money by investing small, short bursts of capital, then all you have to do is scale — plain and simple. You don’t have to overthink it.

How to invest $1,000 to make money fast

If you have $1,000 to invest, you can make money a variety of ways. But there are some methods that trump others. The play here is speed. We’re not talking about long-term, buy-hold strategies. Those are terrific if you’re looking to invest your capital over at least a two- to five-year period. We’re talking about ways you can make money fast.

Even when it comes to markets that might take time to move or have longer cycles, investments can often turn into realized profits and quick gains by leveraging the right strategies. What’s the right strategy? Sure, long-term works. Real estate and other time-intensive strategies will eventually get you there.

Raghee Horner of Simpler Futures says that “long-term interest rates are the next big trade,” while Jim Cramer of Mad Money says that “there are tons of people who are late to trends by nature and adopt a trend after it’s no longer in fashion.” By jumping in and out of long-term investments like that, you’re far more likely to lose your shirt than if you time your short-term plays just right.

It’s not so much about trying to catch the latest trend. It’s not about becoming a webinar guru like Jason Fladlien or Liz Benny — or even building out sales funnels or optimizing your conversions. Investing your money is more about paying careful attention to indicators that can really move the needle in the short-term as opposed to the longer term. It’s also about leveraging and hedging your investments the right way without putting too much risk on the line.

That doesn’t mean that you don’t need a long-term strategy. You definitely do. But if you’re looking to create some momentum and generate some capital quickly, in the near-term, then the following investment strategies might help you do just that.

1. Play the stock market.

Day trading is not for the faint of heart. It takes grit and determination. It takes understanding the different market forces at play. This isn’t something intended for amateurs. But, if learned and learned well, it is a way where you can quickly — within the span of hours — make a significant amount of money with a relatively small investment.

There are also ways to hedge your bets when it comes to playing the stock market. Whether you play the general market or you trade penny stocks, ensure that you set stop-loss limits to cut any potential for significant depreciations. Now, if you’re an advanced trader, you likely understand that market makers often move stocks to play into either our fear of failure or our greed. And they’ll often push a stock down to a certain price to enhance that fear and play right into their pockets.

When it comes to penny stocks, this is further exaggerated. So you have to understand what you’re doing and be able to analyze the market forces and make significant gains. Pay attention to moving averages. Often, when stocks break through 200-day moving averages, there’s potential for either large upside or big downside.

2. Invest in a money-making course.

Investing in yourself is one of the best possible investments you can make. While you might not be able to pinpoint an actualized return on investment, there’s no money that’s better spent. Invest in yourself. Invest in your education. Learn. Adapt. Grow. Discover what you’re passionate about.

There are loads of money-making courses on the internet. The hard part is choosing the right one. From ebooks to social media marketing, search engine optimization and beyond, the possibilities are endless. While many money-making gurus might pop up on social media, not all courses are created alike. Spend time doing your due diligence and research to choose the one that’s right for you.

3. Trade commodities.

Trading commodities like gold and silver present a rare opportunity, especially when they’re trading at the lower end of their five-year range. Metrics like that give a strong indication on where commodities might be heading. Carolyn Boroden of Fibonacci Queen says, “I have long-term support and timing in the silver markets because silver is a solid hedge on inflation. Plus, commodities like silver are tangible assets that people can hold onto.”

The fundamentals of economics drives the price of commodities. As supply dips, demand increases and prices rise. Any disruption to a supply chain has a severe impact on prices. For example, a health scare to livestock can significantly alter prices as scarcity reins free. However, livestock and meat are just one form of commodities.

Metals, energy and agriculture are other types of commodities. To invest, you can use an exchange like the London Metal Exchange or the Chicago Mercantile Exchange, as well as many others. Often, investing in commodities means investing in futures contracts. Effectively, that’s a pre-arranged agreement to buy a specific quantity at a specific price in the future. These are leveraged contracts, providing both big upside and a potential for large downside, so exercise caution.

4. Trade cryptocurrencies.

Cryptocurrencies are on the rise. While trading them might seem risky, if you hedge your bets here as well, you could limit some fallout from a poorly-timed trade. There are plenty of platforms for trading cryptocurrencies as well. But before you dive in, educate yourself. Find courses on platforms like Udemy, Kajabi or Teachable. And learn the intricacies of trading things like Bitcoin, Ether, Litecoin and others.

While there are over 3,000 cryptocurrencies in existence, only a handful really matter today. Find an exchange, research the trading patterns, look for breakouts of long-term moving averages and get busy trading. You can use exchanges like Coinbase, Kraken or Cex.io, along with many others, to make the actual trades.

5. Use peer-to-peer lending.

Peer-to-peer lending is a hot investment vehicle these days. While you might not get rich investing in a peer-to-peer lending network, you could definitely make a bit of coin. Which lending platform do you use? Today, there are many to choose from, but the most popular ones include Lending Club, Peer Form and Prosper.

How does this work? Peer-to-peer lending platforms allow you to give small bursts of capital to businesses or individuals while collecting an interest rate on the return. You get more money than you would if you placed it in a savings account, plus your risk is limited because the algorithms are doing much of the work for you.

Once you identify the offer, you can dig in and do some research — then, you can either take the deal or not. You’ll have your risk evaluated based on a proprietary algorithm that includes employment and credit history, and you’ll be able to make the decision to invest based on a variety of well-thought-out data.

6. Trade options.

When it comes to options, Tom Sosnoff at Tastyworks says, “Trade small and trade often.” What type should you trade? There are loads of vehicles, such as FOREX and stocks. The best way to make money by investing when it comes to options is to jump in at around 15 days before corporate earnings are released. What type should you buy? Money calls.

The optimal time to sell those money calls is the day before the company releases its earnings. There’s just so much excitement and anticipation around earnings that it typically drives up the price, giving you a consistent winner. But don’t hold through the earnings. That’s a gamble you don’t want to take if you’re not a seasoned investor, says John Carter from Simpler Trading.

7. Flip real estate contracts.

Making money with real estate might seem like a long-term prospect, but it’s not. There are ways you can take as little as $500 to $1,000 and invest it in flipping real estate contracts to make money fast. How? Use a system like Kent Clothier’s REWW to first understand how the market works. It’ll then provide you with the data and tools to identify vacant homes, distressed sellers and cash buyers.

While most people think that real estate is won by flipping traditional homes and doing the renovations yourself, the fastest money you can make in real estate involves flipping the actual contract itself. It’s arbitrage. Identify the motivated sellers and cash buyers, bring them together and effectively broker the deal. It might seem odd on the first go, but once you get the hang of it, you can become a mini-mogul in the real estate industry by simply scaling out this one single strategy. It works, and it’s touted by some of the world’s most successful real estate investors.

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Disclaimer: Trading carries a high level of risk, and may not be suitable for all investors. Before deciding to invest you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment. Therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

Disclaimer: Trading carries a high level of risk, and may not be suitable for all investors. Before deciding to invest you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

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