Understanding how to profit during a bear market is a key competency for every trader who aims to protect capital when the trend is bearish. In a declining market, buy-and-hold strategies can underperform, but diversified strategies like hedging can generate returns.
When discussing settlement terms, what many call the cash payment settlement option is often cash settlement, meaning the profit or loss is paid in cash.
An options trading course can teach the fundamentals such as distinguishing between call and put options. A call contract gives the right to buy an asset at a set price, while a put gives the ability to dispose of it.
In trading terminology, understanding buy to open and buy to close is important. Opening a position by buying means starting a new contract, while buy to close means closing an open short trade.
The popular iron condor technique is an income-generating options play using multiple calls and puts, aiming to benefit when prices stay within a range.
In market orders, the bid-ask difference reflects the two sides of a quote. The bid price is what the market will pay, and the offer is what the market demands.
For options, sell to open vs sell to close is another distinction. Initiating a short by selling means opening a short position, while Selling to exit means ending a long trade.
Rolling a position is extending or changing terms by closing one contract and opening another to manage risk.
A trailing stop loss is a stop that follows price that protects gains by tracking price in real time. This is not to be confused with a fixed stop, since it tightens automatically.
Chart patterns like the M-shaped double top signal possible trend change after option strangle two highs at the same level. Recognizing it can prevent losses.
Overall, mastering these strategies — from differences between call and put to what is trailing stop loss — equips traders to navigate complex markets.