Options Education

OIC204C: Options Strategies in a Bearish Market

Course Objective:

To understand various option strategies that can be used given a bearish outlook. When an investor believes individual stocks or the markets are headed lower there are numerous ways to implement option strategies to benefit from this outlook. This course will cover the risks and potential rewards of a few of these strategies.

Who Should Take This Course:

Intermediate and Advanced students

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Course Description:

"Options Strategies in a Bearish Market" is designed to expose the different ways that options can limit risk or increase profit in a Bear Market. This course discusses the various option strategies that take advantage of a Bear market.

Course Chapters

Chapter 1 - Introduction

The introduction sets the groundwork for the differences between Bear market option strategies and outright stock or index ownership. The three main benefits of Bear market option positions of protection, limiting loss, generating income are introduced. At the conclusion of this course and prior to the final quiz the student should be comfortable with the all Bear market strategies.

Chapter 2 - Buying Puts

In this chapter the purchase of puts is discussed in two forms- the purchase of puts in conjunction with stock purchase / ownership and the purchase of puts as a speculative strategy.

The differences between these two strategies are explained. The purchase of puts with stock is explained as a protective strategy, while the purchase of puts by themselves are speculative and offer leverage in a Bear market.

Chapter 3 - Uncovered Calls

This chapter gives discusses the use of calls in a Bear market. The maximum profit and maximum loss are explained along with margin maintenance requirements of uncovered calls. This chapter has an interactive example that illustrates these points at expiration.

Chapter 4 - Covered Calls

For this chapter the advantages of covered calls are introduced. This chapter explains how covered calls are similar to protective puts while enumerating maximum profit / loss and risks associated.

Chapter 5 - Index Puts

The uses of Index puts in a Bear market are explained here. The important need to have the particular index match your portfolio is stressed, along with the differences in settlement types of American and European style options.

Chapter 6 - Vertical Spreads

Vertical spreads for a Bear market are introduced in Chapter 6. These spreads can be debit or credits and are explained and prefaced for the following two chapters.

Chapter 7 - Bear Put Spread

In this chapter the uses of a Bear put spread are explained. The maximum profit and loss computations are explained. This chapter also explains how this spread is a debit spread and differs from a credit spread.

Chapter 8 - Bear Call Spread

For this chapter the uses of a Bear call spread are explained. The similarities and differences between this spread strategy and the Bear put spread are compared and contrasted.

Conclusion

The conclusion briefly recaps how minimizing loss can be balanced with limitations on profit potential using these bearish strategies.

Quiz

Test your knowledge.

Course Resources:

Podcasts

OIC222P: LEAPS

OIC341P: Income Strategies Part 1

OIC342P: Income Strategies Part 2

Webcasts

OIC301W: Trading Spreads

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