Josip Causic

Working Bearish Options for Profits

by Josip Causic   01/12/09

That means that I paid only two commissions; those two commissions were the ones that I paid at the entry and none needs to be paid at the end when the current price is so far removed from the sold strike price. The QQQQ is at the 30-ish level, while the sold one is at 33.

Working the Bear

In conclusion, Bear Call, or being a seller of the premium in general, works as long as a trader is correct on his or her technical analysis. The credit spreads aren't meant to be a type of trade as place-it-and-forget-about-it. The credit spreads DO need to be monitored and if things go wrong, then the sold strike price (also known as the obligation) needs to be purchased back.

An advantage of spread trading is the clearly defined risk and also at the same time, the unmistakably defined reward. Those are the facts of a Bear Call trade that netted $510, and I hope this newsletter clears up any confusion about the details.

Once again, those who sell premium last. Casinos are going to outlive all of us -- therefore, be a seller of premium with a good knowledge of technical analysis.

---

Josip Cusic is an instructor with the Online Trading Academy. To learn more about him, read his bio here

This article originally appeared on The Options Insider Web site.