Bullet Trade

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.

BREAKING DOWN '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.

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RELATED FAQS
  1. What risks should I consider taking a short put position?

    Learn what risks to consider before taking a short put position. Shorting puts is a great strategy to earn income in certain ... Read Answer >>
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    ETFs (an acronym for exchange-traded funds) are treated like stock on exchanges; as such, they are also allowed to be sold ... Read Answer >>
  3. How do traders combine a short put with other positions to hedge?

    Learn how sold puts can be utilized in different types of hedging strategies, and understand some of the more common option ... Read Answer >>
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