Bearish pressure on a stock can generate profits for short sellers. It can also earn money for option traders. Using a bear call spread, a net premium is earned, and this income will be pocketed if the stock makes just a modest decline.
Related To: Call Options
If you want a conservative option investment that controls losses, take a look at the butterfly strategy. This derivative tactic comes with finite profitability, but also downside protection. The butterfly play is best for stocks that have low volatility.
Let’s imagine that I have a tractor I am offering for sale for $20,000—which is a smoking deal because the same tractor is selling elsewhere for $25,000. My neighbor realizes that I am unaware of the fair market price and concludes that my tractor would be a good investment for him.
