Bearish Options Strategies
Learning how to make money in down markets is a critical component to your long-term success rate. The ability to profit when stocks are falling gives options traders a superior edge in the financial markets.
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Covered Put

A covered put is an options strategy with undefined risk and limited profit potential that combines selling stock with a short put option. Covered puts are used to generate income if an investor is moderately bearish while short a stock.
Covered Put
Kirk Du Plessis
Apr 19, 2021

Writing covered puts is a bearish options trading strategy involving the selling of an ATM or OTM put option below the market price while shorting 100 shares of the underlying stock. Selling the put option takes in a credit that is then used to widen your break-even point above where you originally sold the shares of stock. For example, if you are short stock at $50, and selling the put option collected $1.50 in credit, your new break-even price would be $51.50 for the overall position. Hint: this strategy's payoff diagram looks identical to just simply using a short call above the market and is less capital intensive.

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Synthetic Short Stock
To create a short synthetic stock position, you simply buy an ATM put option and sell an ATM call option at the same strike price. This creates a bearish position with much less capital than shorting a stock.

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