Understanding how to profit during a bear market is a crucial skill for any investor who aims to protect capital when markets decline. In a bear market, simply holding stocks might not work, but alternative tactics like short selling can generate returns.
When discussing settlement terms, the other term for cash payment settlement option is often cash settlement, meaning the no physical asset is delivered.
An options education program 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 option gives the right to sell it.
In trading terminology, buy to open vs buy to close is important. Opening a position by buying means starting a new contract, while Closing a position by buying means closing an open short trade.
The iron condor strategy is a neutral-market options strategy using multiple calls and puts, aiming to earn premium in a sideways market.
In market orders, the bid-ask difference reflects the two sides of a quote. The buy bid is what the market will pay, and the ask price is what sellers want.
For sell to open vs sell to close options, understanding sell to open and sell to close is another distinction. Selling to create a position means beginning with a sell order, while Closing a long position by selling means selling an asset you own.
Rolling a position is extending or changing terms by changing trade parameters to adapt to market changes.
A dynamic stop loss is an adjustable exit point that protects gains by adjusting as the asset moves. This is not to be confused with a fixed stop, since it moves favorably with price.
Chart patterns like the double top chart pattern signal a potential reversal after two highs at the same level. Recognizing it can help traders exit early.
Overall, learning these definitions — from call vs put option to the meaning of trailing stop loss — prepares market participants to succeed in any market condition.