Understanding how to profit during a bear market is a crucial skill for every trader who wants to succeed when prices fall. In a downtrend, traditional long positions may lose value, but different approaches like options trading can provide income.
When discussing settlement terms, the other term for cash payment settlement option is often monetary settlement, meaning the no physical asset is delivered.
An comprehensive course on options can teach the fundamentals such as call vs put options. A call contract gives the opportunity to purchase an asset at a set price, while a put contract 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 Purchasing to exit means closing an open short trade.
The popular iron condor technique is a limited-risk/limited-reward structure using both a call spread and a put spread, aiming to benefit when prices stay within a range.
In market orders, the bid-ask difference reflects the market spread. The bid price is what the market will pay, and the ask is what is required to sell.
For options, understanding sell to open and sell to close is another distinction. Selling to create a position means starting exposure by selling, while sell to close means selling an asset you own.
Option rolling is moving a position forward by closing one contract and opening another to adapt to market changes.
A trailing stop is a moving stop order that limits downside by tracking price in real time. This is not to be confused with a fixed stop, since it moves favorably with price.
Chart patterns like the two-peak pattern signal possible trend change after two failed breakouts. Recognizing it can trigger short entries.
Overall, understanding these concepts — from call and put comparison to the meaning of trailing stop loss — prepares market participants to succeed in trading plan any market condition.