OptioNewton

Bearish & Protective Strategies

Bearish

Single Legged

Short Stock -

Buy a put -

Write a call -

Spreads

Double Legged

Bear Call Spread - involves selling an ITM call and buying an OTM call. 

Bear Put Spread - involves buying and ITM put and selling an OTM put.

Protective Strategies

Protection of an owned stock position -

Write an ATM or OTM Call -

Buy an ITM Put - ITM options have less time premium than ATM or OTM options. The further ITM the option, the less time premium. So an ITM put can provide downward protection at close to a penny for penny movement in the stock. On the other hand, if the stock goes up, the ITM put counteracts any profit made on the stock moving up. The next strategy can help with this.

Protective Straddle - might be the purchase of a straddle that has the put ITM with the same strike call being OTM. Because the call is OTM, it should be relatively cheap.

Collar - mentioned earlier is a protective combination to protect a long position in a stock. An OTM call is written and an OTM put is bought.