Candlestick Trading Blog
October 13, 2009
Options Education
| Bearish Trading Strategies As you learn how to trade options there are numerous strategies available for to you to use. In today’s article we discuss the bearish options trading strategies that options traders will use as part of your options education. Bear Call Spread – This options strategy is used when the market is extremely volatile and moderately bearish. This strategy is also known as the Bear Credit Spread and is used when there are erratic movements in the bear market. Bear Put Spread – This strategy is also used when the market is volatile and moderately bearish. This method is also known as the Vertical Bear Puts and it is used at times to realize profits when the market is looking to the money of the investor. Buying Puts – When options trading, traders will use this strategy when they anticipate that a stock will decrease in price during a specific time period. The profit is recognized when the stock and its underlying put option decrease in price during a determined amount of time. You will learn that the profit potential is limited because a stock price can never go below zero. Selling Calls – This stock option strategy is also known as selling bear calls and vertical bear calls. This strategy is bearish because the trader profits if they underlying stock decreases in value. The strategy requires the trader to buy out-of-the-money call options and sell in-the-money call options on the same stock with the same expiration date. The trader realizes maximum profits from selling calls when the in-the-money stock closes lower than it strike price at its expiration date. Put Hedge - This strategy occurs when the trader buys put during a bearish market in order to protect stock shares that the trader is reluctant to sell and that are vulnerable to a decline in the market. Traders will use this strategy to insulate their portfolios from loss in a bearish market. Simple options strategies provide a tremendous source of income when the right trading strategy is applied to the correct price move. These simple trading techniques will be demonstrated thoroughly during the Candlestick Forum Option Trading program on October 17 and 18th. If you would like to learn how to dramatically increase your income while at the same time reducing your risk, take advantage of the trading knowledge that has been applied to over 20 years of candlestick application. Click here for more information. Online Stock Market Reviews presented live via the internet by Stephen Bigalow |
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