The best Bearish Trading Strategies
Bearish Trading Strategies
How can you benefit from the best Bearish Trading Strategies and what are they? Bearish strategies are used by traders who anticipate that a market or a stock moves down. For example, if a trader believes a company is about to publicize its monthly report figures that will be less than expected.
Making money in a Bear Market is very simple to execute when you understand how to trade options. Some of the most incredible trading profits can be made when prices fall – because it is widely known that Stock prices fall much faster than they rise!
If you like to use simple option strategies you can use a naked call or naked put.
1. Long Put
Bearish strategies in options trading is used when the options trader expects the underlying stock price to move downwards. It is necessary to assess how low the stock price can go and the timeframe in which the decline will happen in order to select the optimum trading strategy.
The most bearish trading strategies is the simple put buying strategy utilized by most novice options traders.
Buying a put option, also known as going long on a put option, is the simplest bearish strategy. When buying a put option you are buying the right to sell the underlying security at a certain price.
If the price declines, you can then buy the underlying security and exercise the option to sell at a higher price. The difference between the security’s current price and the exercise price is your profit. If you choose to sell the put option instead of exercising it, your profit will be realized from the higher value of the put option.
2. Short Call
Bearish trading strategies are options strategies that make money as long as the underlying stock price goes down before expiration. These strategies usually provide a small upside protection as well. A good example of such a strategy is to write of out-of-the-money naked calls.
When you write a call option, you are selling the right for someone to buy a security from you. Writing a naked call option means to sell a call option on a security that you do not own. It can be thought of like writing an option to sell a car that you don’t own (yet). If the price of the stock declines you will make a profit equal to the value of the option you sold, but your potential losses are unlimited if the stock begins to rise.
Writing a naked call option has similar characteristics to writing a naked put option. The time decay of the options contract will give you a profit even if the stock’s price doesn’t move. Just like the naked put option, the value of the call option you sold will decrease as the expiration date nears. This decrease in value is your profit.
Trades with small portfolio or if you perceive selling naked options as to dangerous you might want to sell options spreads instead. Options spreads have define risk.
Why Selling options is better
Buying Options Vs. Selling Options. What is better buying or selling options? Would you rather pay in order to have a chance to make a profit or receive option premium at front.
Trades that Sell Option Premium has the several ways to make consistent profit with options. You don’t have to know in which direction a stock is moving in order to make a profit. Continue to read buying-options-or-selling-options/