Bearish Strategies

Opinion: Bearish.

Strategy Review: For most investors, prior to exchange-listed equity options, there was no acceptable strategy for the bearish investor. The risks and confusion surrounding selling XYZ short meant frustration for the investor seeking to profit from XYZ’s decline.

Today, options offer the “Bear” many different strategies, each with its own risk/reward profile.

Investment

Current Position: No position.

Opinion: Bearish.

Prior to exchange-listed options, most stock investors who thought XYZ was hoing to decline simply made sure they liquidated any long positions in the stock before either:

- Returning to the sidelines to watch and wait, or

- SELLING XYZ short (few investors viewed this as an alternative).

Option Strategies: Equity options offer the stock investor numerous bearish strategies with various costs and risk/reward profiles. Depending on the stock investor’s near-term outlook for XYZ, an option strategy can be designed to:

- Establish a bearish position with limited risk,

- Lower both the cost and risk of implementing the opinion, and/or

- Profit from a sideways to down trading range by either premium decay or accumulating XYZ at lower prices.