Join Your Exam WhatsApp group to get regular news, updates & study materials HOW TO JOIN

Bullish Bearish Scenario

Bullish Bearish Scenario

Bullish Market Scenario:-

Bull Call Spread: The bull call spread option trading strategy is employed when the options trader thinks that the price of the underlying asset will go up moderately in the near term. Bull call spreads can be implemented by buying an at-the-money call option  while simultaneously writing a higher striking out-of-the-money call option. By shorting the out-of-the-money call, the options trader reduces the cost of establishing the bullish position but forgoes the chance of making a large profit in the event that the underlying asset price skyrockets. The bull call spread option strategy is also known as the bull call debit spread as a debit is taken upon entering the trade.

Bull Put Spread: The bull put spread option trading strategy is employed when the options trader thinks that the price of the underlying asset will go up moderately in the near term. The bull put spread options strategy is also known as the bull put credit spread as a credit is received upon entering the trade. Bull put spreads can be implemented by selling a higher striking in-the-money put option and buying a lower striking out-of-the-money put option on the same underlying stock with the same expiration date.

Bull Calendar Spread: Using calls, the bull calendar spread strategy can be setup by buying long term slightly out-of-the-money calls and simultaneously writing an equal number of near month calls of the same underlying security with the same strike price.

The options trader applying this strategy is bullish for the long term and is selling the near month calls with the intention to ride the long term calls for free.

Bullish, Bearish Scenario

Diagonal Bull Call Spread: The diagonal bull call spread strategy involves buying long term calls and simultaneously writing an equal number of near-month calls of the same underlying stock with a higher strike. This strategy is typically employed when the options trader is bullish on the underlying stock over the longer term but is neutral to mildly bullish in the near term.

Bearish Market Scenario-

Bear Call Spread:- The bear call spread option trading strategy is employed when the options trader thinks that the price of the underlying asset will go down moderately in the near term.

The bear call spread option strategy is also known as the bear call credit spread as a credit is received upon entering the trade. Bear call spreads can be implemented by buying call options of a certain strike price and selling the same number of call options of lower strike price on the same underlying security expiring in the same month.

Bear Put Spread:– The bear put spread option trading strategy is employed when the options trader thinks that the price of the underlying asset will go down moderately in the near term.

Bear put spreads can be implemented by buying a higher striking in-the-money put option and selling a lower striking out-of-the-money put option of the same underlying security with the same expiration date.

By shorting the out-of-the-money put, the options trader reduces the cost of establishing the bearish position but forgoes the chance of making a large profit in the event that the underlying asset price plummets. The bear put spread options strategy is also known as the bear put debit spread as a debit is taken upon entering the trade.

Diagonal Bear Put Spread:- The diagonal bear put spread strategy involves buying long- term puts and simultaneously writing an equal number of near-month puts of the same underlying stock with a lower strike.

This strategy is typically employed when the options trader is bearish on the underlying stock over the longer term but is neutral to mildly bearish in the near term Bullish, Bearish Scenario

Bullish Bearish Scenario

cakart6

Bullish Bearish Scenario

Leave a comment

Your email address will not be published. Required fields are marked *