This document discusses the payoff structures of various derivative instruments. It begins by introducing futures contracts and describes the payoff profiles for buyers and sellers of futures. It then covers call and put options, explaining the payoffs graphically for buyers and sellers under different market conditions. Specific strategies like protective puts and covered calls are also outlined. The key payoffs and risks of bearish options strategies aiming to profit from downward price moves are summarized at the end.
23. Bearish strategies in options trading are employed when
the options trader expects the underlying stock price to
move downwards.
WHY USE BEARISH STRATEGIES?
•Limiting lose
• Negative effects of time decay.
• Generate profit.
DISADVANTAGES:
• Limited profit potential
• Number of different strategies
• Takes extra time and effort to decide best one for any situation.