Bullet Trade

AAA

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. Short Sale

    A market transaction in which an investor sells borrowed securities ...
  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 >>
Related Articles
  1. Options & Futures

    What To Do When Your Options Trade Goes Awry

    Check out some repair strategies to help boost the profit potential of a losing position.
  2. Options & Futures

    Volatility Index Uncovers Market Bottoms

    VIX can gauge when the market has hit bottom - a welcome sign of better things to come.
  3. Retirement

    The Money Market

    If your investments in the stock market are keeping you from sleeping at night, it's time to learn about the safer alternatives in the money market.
  4. Options & Futures

    Get To Know These Crucial US Options Market Regulations

    How are options regulated in the U.S and which organizations are involved in options market regulations?
  5. Mutual Funds & ETFs

    Are These the Top Inverse ETFs of 2015?

    Short shy? Here's a list of top inverse ETFs to help you profit from a decline in the value of an index or group of stocks.
  6. Options & Futures

    Give Yourself More Options With Real Estate Options

    Real estate options have many benefits, including a smaller initial capital requirement.
  7. Mutual Funds & ETFs

    Will the Natural Gas ETF KOLD Stay Hot?

    Proshares UltraShort Bloomberg Natural Gas ETF isn't an investment for the faint of heart.
  8. Options & Futures

    The Fancy Way To Diversify Your Portfolio: Precious Metal Options

    A guide with strategies on how to invest or trade in precious metals by using options.
  9. Options & Futures

    When And How To Take Profits On Options

    Here are the different criteria to ensure maximum profit taking while trading options.
  10. Brokers

    OptionsXpress Vs. OptionsHouse: Which One To Pick?

    OptionsXpress and OptionsBroker -- each offers a price mix and set of services suitable for certain investors based on their trade approach and priorities.

You May Also Like

Hot Definitions
  1. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  2. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  3. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  4. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  5. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  6. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
Trading Center