'Bear Put spread' is a moderately bearish strategy built by buying a Put close to the current market price of the underlying and selling the same expiry Put, but of a strike lower than the Put bought.
Bear Put spread is a moderately bearish strategy. The strategy is built by Buying a Put close to the current market price of the underlying and Selling the same expiry Put but of a strike lower than the Put bought.
As COVID-19 pandemic turns the entire market more headline-driven than driven by solid economic data. The moves upward or downward become vulnerable to reversals and respite.
Considering the unpredictability of the pandemic, it makes sense to keep the trades limited and protected. Hence, Modified Butterfly on monthly series options is advised.
Empirically such periods have ended in prolonged calmer times. Till such signs come into trade analytics with a drop in Implied Volatility, it would be wise to await an opportunity instead of venturing into a trade.
Options trading is more and more becoming an integral part of trading especially after benchmark indices topped global charts for highest Options Volumes.
As a monthly event for all the underlying stocks as of now, ‘Expiry’ changes a lot of equations and is capable of a momentary upsetting a well-established order.
In the case of weekly expiries, if we are mildly bullish or bearish it can be translated into trading action very easily by selling more Calls/ Puts against Calls/Puts bought
The series of ups and downs in any direction makes trading worth
Most of the times the cost of hedging wouldn’t go beyond 3-4% even if the hedge is kept for a good 20+ sessions. I have always found prudence in choosing the strike close to the current market price.