Bearish option trading strategy

Good position if you want to be in the market but are less confident of bullish expectations. This is the most popular bullish trade. Bear Spread - If you think the market will go down, but with limited downside. Good position if you want to be in the market but are less confident of bearish expectations.

Moderately Bearish

The most popular position among bears because it may be entered as a conservative trade when uncertain about bearish stance. Long Butterfly - One of the few positions which may be entered advantageously in a long-term options series.

Enter when, with one month or more to go, cost of the spread is 10 percent or less of B — A 20 percent if a strike exists between A and B. This is a rule of thumb; check theoretical values. Short Butterfly - When the market is either below A or above C and position is overpriced with a month or so left.

Or when only a few weeks are left, market is near B, and you expect an imminent move in either direction.

Bearish Option Strategies

Long Iron Butterfly - When the market is either below A or above C and the position is underpriced with a month or so left. Or when only a few weeks are left, market is near B, and you expect an imminent breakout move in either direction.

Bearish Options Strategies (5 Essential Bear Spreads)

Long Straddle - If market is near A and you expect it to start moving but are not sure which way. Especially good position if market has been quiet, then starts to zigzag sharply, signaling potential eruption. Short Straddle - If market is near A and you expect market is stagnating. Because you are short options, you reap profits as they decay — as long as market remains near A.

Long Strangle - If market is within or near A-B range and has been stagnant. If market explodes either way, you make money; if market continues to stagnate, you lose less than with a long straddle. Also useful if implied volatility is expected to increase.

10 Options Strategies to Know

Short Strangle - If market is within or near A-B range and, though active, is quieting down. If market goes into stagnation, you make money; if it continues to be active, you have a bit less risk then with a short straddle. Ratio Call Spread - Usually entered when market is near A and user expects a slight to moderate rise in market but sees a potential for sell-off.

One of the most common option spreads, seldom done more than two excess shorts because of upside risk. Ratio Put Spread - Usually entered when market is near B and you expect market to fall slightly to moderately, but see a potential for sharp rise. One of the most common option spreads, seldom done more than two excess shorts because of downside risk.

Mutual Funds and Mutual Fund Investing - Fidelity Investments

Ratio Call Backspread - Normally entered when market is near B and shows signs of increasing activity, with greater probability to upside. Covered Call. Protective Put. Cash-Secured Put. Long Call.


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Long Put. Fig Leaf. Long Call Spread. Long Put Spread. Short Call Spread. Short Put Spread. Long Straddle. Long Strangle.


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