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Suppose trader Frank is moderately bearish on the market, which trading strategy(or strategies) will you recommend...

Suppose trader Frank is moderately bearish on the market, which trading strategy(or strategies) will you recommend to him?

a.

Long a butterfly
b.

Short a butterfly
c.

Long a put
d.

Long a bear spread
e.

Long a call
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Answer #1

Option d. is correct. Long a bear spread

If Frank is moderately bearish, then he should enter into a long bearish spread, in which he would buy a put at a certain strike price and then sell another put at a lower strike.

Long butterfly and short butterfly are non-directional strategies.

Longing a put is an extremely bearish strategy.

Longing a call is an extremely bullish strategy.

Can you please upvote? Thank You :-)

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