Bullet Trade

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DEFINITION of 'Bullet Trade'

The act of purchasing an "in the money" put option so that the buyer can capitalize on a bear market by effectively shorting a stock without waiting for an uptick.

INVESTOPEDIA EXPLAINS 'Bullet Trade'

This is a strategy commonly used by investors that wish to capitalize on a falling market. Due to short sale rules by different exchanges, investors may be delayed in shorting a position because of continuously declining markets. An immediate alternative for creating the short strategy is to buy a put option.

RELATED TERMS
  1. Short-Sale Rule

    A Securities and Exchange Commission (SEC) trading regulation ...
  2. Tick Test Rules

    A now defunct rule that placed restrictions on when a short sale ...
  3. Bear

    An investor who believes that a particular security or market ...
  4. Long (or Long Position)

    1. The buying of a security such as a stock, commodity or currency, ...
  5. Put

    An option contract giving the owner the right, but not the obligation, ...
  6. In The Money

    1. For a call option, when the option's strike price is below ...
RELATED FAQS
  1. Should I buy options that are in the money or out of the money?

    Choosing which specific option to buy can often be a complicated process, and there are literally hundreds of optionable ... Read Full Answer >>
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