December 18, by Brian Mallia. For those who are familiar with the stock market, you are probably familiar with the terms bearish, bullish, and neutral. This is also a great post for those looking to find a list of strategies for when your market assumption is bearish, bullish, or neutral.
Want an easy way to remembe r that a bear market means a downward trend? Here is a good mnemonic device Bearish is not only a term to describe a particular market condition, it is also used to describe the bias an i nvestor has when considering which type of strategy they put on.
Before placing any type of trade stock, option, future, etc. In the same vein as a bear market, having a bearish assumption means that you believe that the price of the stock will go down over a given time period.
That may leave you wondering Below you will find a list of bearish option trading strategies in no particular order: It may seem like a long list, but as a trader, it is good to have options. You may never use some of these strategies, and that's perfectly fine! Use only the ones you feel comfortable with. You can always add new strategies to your arsenal as you begin to perfect the mechanics you use for the strategies you are familiar with.
Now that you're equipped with the strategies to place a trade when you have a bearish assumption, let's take a look at the other side of that coin and gain a better understanding of the term "bullish. The term bullish is the inverse to the term bearish. If I say that the market is bullish, it means that in the given timeframe, the market has been trending upwards. Do you recall our simple way to remember that bear market means a downward trend?
Well, there is a similar adage for bull markets. As cheesy as these mnemonic devices are, just remember, they are actually a helpful way to solidify your ability to remember which term means which direction if you do not already have this locked away in the memory bank.
When placing a trade, if your assumption is that the stock you are researching is going to be going up in a given timeframe, then you have what is called a bullish assumption.
This is again a very long list meant as a point of reference, not a 'how-to' for the best conditions to implement a certain strategy. We have made it through all of the animal terminology in this post, but have one last market assumption to cover - a neutral assumption. Unlike bearish and bullish, a neutral assumption of an underlying means that you are not biased one way or another.
You believe that the stock will continue to trade within the range that is has been without trending up or down for extended periods of time. There are many different strategies that can be used no matter which direction you think that a stock will move.
Remember to always use strategies you are comfortable with. Also, check out Step Up to Options to learn how more about basic option trades. Share your market assumptions by tweeting to us doughtrading! Increase your probability of profit when buying long options by trading long vertical spreads instead. In part 3 of our series on vertical option spreads, we go over long vertical spreads, also known as debit spreads.
In part 3 of our liquidity series we go over strike price volume. The stock might be liquid, but is the strike price of the option you are trading? This week she is talking about IV Rank, see what questions the support desk gets the most! Beginner intermediate Blog Sign Up Login. Example chart of a bear market in dough. Obligatory 'bearish market' picture. Bearish Strategies Below you will find a list of bearish option trading strategies in no particular order: Obligatory 'bullish market' picture.
Example chart of a bull market. When a bull attacks, its horns are pointing upwards towards the sky. A Bullish Assumption When placing a trade, if your assumption is that the stock you are researching is going to be going up in a given timeframe, then you have what is called a bullish assumption. Bullish Strategies Below is a list of bullish options trading strategies: A neutral market is seen in this screenshot from the dough trading platform.
Neutral Assumption Unlike bearish and bullish, a neutral assumption of an underlying means that you are not biased one way or another. Jul 14, beginner Trading strategy , defined risk , bearish , vertical , spread m slabinski Comment. Vertical Options Part 3: Trading a Long Vertical Spread. Strike Price Volume Liquidity Part 3. Jul 2, beginner iv rank , implied volatility , high implied volatility , education , Tracy Algeo Tracy Algeo Comment.More...