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. How do you use put options to profit from a bear market?

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  3. What risks should I consider taking a short put position?

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