Understanding how to profit during a bear market is a key competency for every trader who aims to protect capital when prices fall. In a downtrend, simply holding stocks might not work, but alternative tactics like options trading can produce profits.
When discussing settlement terms, the other term for cash payment settlement option is often cash settlement, meaning the profit or loss is paid in cash.
An comprehensive course on options can equip traders with knowledge such as call vs put options. A call option gives the right to buy an asset at a set price, while a put option gives the right to sell it.
In trading terminology, the difference between buy to open and buy to close is important. Opening a position by buying means starting a new contract, while Purchasing to exit means closing an open short trade.
The popular iron condor technique is a limited-risk/limited-reward structure using multiple calls and puts, aiming to profit from low volatility.
In market orders, the bid-ask difference reflects the market spread. The buy bid is what a trader offers to buy, and the ask price is what the market demands.
For options, understanding sell to open and sell to close is another distinction. Sell to open means opening a short position, while Closing a long position by selling 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 stop that follows price that locks in profits by adjusting as the put vs call option asset moves. This is not to be confused with a fixed stop, since it tightens automatically.
Chart patterns like the double top chart pattern signal a bearish setup after two highs at the same level. Recognizing it can help traders exit early.
Overall, learning these definitions — from differences between call and put to what is trailing stop loss — gives investors tools to navigate complex markets.