Understanding how to profit during a bear market is an essential ability for every trader who aims to protect capital when prices fall. In a downtrend, buy-and-hold strategies can underperform, but alternative tactics like hedging can generate returns.
When discussing settlement terms, the other term for cash payment settlement option is often cash-based closing, meaning the transaction is settled in cash.
An options education program can equip traders with knowledge such as distinguishing between call and put options. A call gives the right to buy an asset at a set price, while a put option gives the opportunity to sell it.
In trading terminology, the difference between buy to open and buy to close is important. Opening a position by buying means initiating exposure, while buy to close means ending an existing short.
The popular iron condor technique is a neutral-market options strategy using both a call spread and a put spread, aiming to earn premium in a sideways market.
In market orders, bid compared to ask reflects the two sides of a quote. The buy bid is what a trader offers what is trailing stop loss to buy, 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 starting exposure by selling, while sell to close means exiting a bought position.
Rolling options is moving a position forward by closing one contract and opening another to manage risk.
A trailing stop is a stop that follows price that protects gains by adjusting as the asset moves. This is not to be confused with a fixed stop, since it adjusts without manual input.
Chart patterns like the double top chart pattern signal possible trend change after two highs at the same level. Recognizing it can prevent losses.
Overall, learning these definitions — from call vs put option to how trailing stops work — gives investors tools to succeed in any market condition.