Connect with us

How To

What is Bullish and Bearish in finance?

You’re reading the news and suddenly two words appear: bullish and bearish. No, you are not out of the loop. They are two Anglo-Saxon concepts that will be shown, more and more, in the Spanish financial media. That is why we want to explain why they are used and what bullish and bearish mean, so that you do not stay out of the economic trends.

Bullish and Bearish. Perhaps it may seem like two words born from a clothing collection but no. They are two concepts from the world of finance that have been appearing in the Anglo-Saxon media for a long time.

Both concepts come respectively from bull (bull) and bear (bear) and describe both stocks and the attitudes of the investor himself. Interesting, right?

It is true that they are not terms of the world of fashion but of the latest trends in a market. In financial language, everything can change with just one word. While one phrase expresses your most positive predictions, the other can reflect the opposite depending on whether it is made by a bull or a bear.

Index of contents

Advertisement

  • What is bullish and bearish?
    • Bull market / Bullish
    • The option to buy at Bullish
    • The option to buy at Bearish
    • The right of sale in Bearish
    • The right of sale in Bullish
  • Buyer and seller characteristics
  • Different strategies in bullish and bearish
  • Strategies at Bearish

What is bullish and bearish?

Both terms, as we explained before, describe situations related to market trends and the two animals are used to name situations referring to the bull market and the bear market.

Bull market / Bullish

That the stock market always closes higher is typical of “bull” stocks. With bullish, there are no negative attitudes or actions, quite the opposite. This term is used to describe financial situations in which the value of an asset, stock index or commodity, is trading higher.

Investors who faithfully believe the price of stocks and behave in a totally optimistic manner are said to be bullish investors. That is, they believe that the price of the shares will rise and they will have paid for the right to buy the shares at a specific price known as the exercise price or strike price.

An investor who has sold the right to sell is also considered bullish on that particular stock. The seller of a right has an obligation to buy the stock and therefore has faith that the share price will rise.

However, the bear, despite being big and strong like the bull, has other financial characteristics and attitudes.

Advertisement

Bear market / Bearish

The bear represents the bear market, characterized by falling prices and pessimistic attitudes of investors.

Investors who believe that the stock price is known as bearish or bearish. The seller has an obligation to sell the shares to the buyer at a certain price and thinks that the price of the shares will fall. The buyer of the right of sale wants to lower the price so that they can sell the stock at a higher price to the seller of the sales contract. They are also considered bearish in the stock.

In financial jargon, buying low to sell high is bullish. For example, buying a share at 50 and selling at 80. While buying a share to sell it for less, is Bearish, a practice of investors who sell short, that is, sell the shares they do not have.

Let’s see two examples in an article published by BusinessInsider  

Advertisement

Its headline reads: “Stay Bullish and prepare for years of stock market gains”

“Stay Bullish and Get Ready for Years of Stock Gains”!

Now, if we change the bull for the bear, the sentence becomes totally negative.

“Stay Bearish and Prepare for Years of Stock Gains”

“Stay Bearish and Prepare for Stock Losses”

Advertisement

The option to buy at Bullish

Buyers have the right to buy shares, want to raise the share price

The option to buy at Bearish

Sellers have an obligation to sell shares, they want to lower the share price

The right of sale in Bearish

Buyers You have the right to sell shares, you want the shares to fall

The right of sale in Bullish

They have the obligation to buy shares, they want to raise the price of the shares

Buyer and seller characteristics

The buyer

Advertisement

He is known as a long-term owner, who has rights, maximum speculative profit, begins the contract with an initial purchase and prefers to practice with exercises

The seller

The seller positions himself in the short term, has obligations, his objective is to have a higher income and begins the contract with an open sale.

Different strategies in bullish and bearish

Strategies in Bullish

Bullish or bullish strategies are used when an increase in the price of a security is forecast and its different options refer to the stock. Behind every bullish strategy is a basic concept. The success of taking these strategies is seen in that they result in profits if the forecast is correct. In case the predictions are not fulfilled in the estimated time, the alternative to trading on the stock market can give losses. Let’s see the different Bullish strategies:

Advertisement

Purchase option

Bullish investors simulate a bought future and are positive about short-term results and predictions for a stock, the call option is a perfect way to capture upside potential with limited downside risk. In this strategy, the call option allows the right to buy the underlying shares at the pre-traded price in the estimated time.

Call back spread

Trading itself involves selling a Call (call option) at a lower strike price and buying a greater number of Calls at a higher strike price. Ideally, this trade is started for a minimal debit or possibly a small credit. Investors prefer to hedge against possible falls, although they continue to maintain bullish attitudes.

Bull Call Spread

Advertisement

A bullish investor who wants to take little risk. It is an options strategy that involves buying call options at a specific strike price, while also selling the same Call number of the same asset and the expiration date, but at a higher strike. It is used when a moderate increase in the price of the underlying asset is expected. This option is never taken if it is believed that the market will have a strong rise.

Bull Put Spread

It consists of a strategy used when the investor predicts or expects a slight increase in the price of the underlying asset and is done by buying a put option at the same time as selling another option with a higher exercise price.

The objective is to keep the price of the underlying above the highest strike price. Steep drops are never expected.

Protective put

Advertisement

It consists of the purchase of a put option on the existing underlying asset in the portfolio. For investors who want to protect the stocks in their portfolio against expected price drops or when there is uncertainty, this protective option offers a way to secure by buying the put option for what the option premium needs to be paid. In this case, investors would buy one contract for every 100 shares they own.

Naked put

They are strategies aimed at buying a share for a lower price than it has in the current market.

This strategy can be excellent or pose a risk to the investor. If the underlying asset moves contrary to predictions, significant losses can result as the option writer is obliged to buy the stock at the strike price regardless of the stage of the trade. However, if the underlying asset moves in the right direction, the benefits will be huge.

Strategies at Bearish

We have already told you that the bearish investor is more pessimistic and tends to calculate downward results, so not everything will be as beautiful as the bullish profile describes it.

Advertisement

Bearish strategies are employed when the options trader expects the price of the underlying shares to move down. You need to assess how low the stock price can go and the time frame in which the decline occurred to select the optimal trading strategy.

Let’s look at the different Bearish strategies

Long put

The long put is a put option that is taken as a speculative game when there is a decrease in the price of capital. This option is bought in the hope that the price of the underlying shares will fall, thereby increasing the value of the shares. For the Bearish investor, this strategy is favorable as they prefer this for sale in a not very long stock.

Naked Call

Advertisement

In the market, “short calls” are taken as bearish market while “short puts” indicate the bullish market.

This has a risk to the bearish investor and should be used with extreme caution. By selling calls or call options without having an underlying stock, you hope that the stock will hold or decline in value. That is why it is baptized as “naked”, because there is no type of coverage and, if the stock increases in value, the risk of loss is unlimited. In the bearish market, it would be necessary to protect capital.

Put Back Spread

It is used by investors who expect big moves down in volatile stocks. This option means selling a put with a high strike price and buying more put options at lower strike prices It combines short puts and long puts and is built to have unlimited profits and limited losses depending on how it is structured .

Bear Call Spread

Advertisement

Bear Spread means that the investor expects a bear market and therefore they are low reward strategies. It is achieved by selling call options at a specific exercise price while buying the same number of call options at a higher exercise price.

The maximum benefit that can be obtained using this strategy is the difference between what is paid in the short put and what is achieved in the long call.

Bear Put Spread

It is a type of options strategy used when a decrease in the price of the underlying asset is expected. Bear Put Spread is achieved by buying put options at a specific strike price, while also selling the same number of puts at a lower strike price. The maximum profit obtained with this strategy is equal to the difference between the two strike prices minus the net cost of the options.

If you are thinking of training in the finance sector or expanding your knowledge in this sector by following higher education from  IEBSchool, we recommend the  Master in Financial Management and Controlling where you will learn together with the best professionals the necessary skills to make the financial decisions that lead to the business towards business success. Sign up now and don’t miss your place!

Advertisement

Master in Finance and Digital Banking

Learn through a practical approach the most current financial techniques

I want to learn!

Leave your vote

Continue Reading
Advertisement
Click to comment

Leave a Reply

Il tuo indirizzo email non sarà pubblicato.

Crypto

How to Create Account in EXMO step by step

In this article you will learn how to register in EXMO in 2022, as you well know it is a cryptocurrency platform to trade, as well as buy and sell digital currencies. Next, we are going to make you a quick and easy guide to create your account.

How to open an account in Exmo.com step by step

Access the official website of EXMO to be able to register for free.

Select “Registration”

At the top right you will have a Registration button, click on it and there you will open a form to place basic data such as username, email, telephone, password and its confirmation, as well as the acceptance of terms and conditions of the platform.

Likewise, if you want you can subscribe to receive news you just have to activate the option. then activate the captcha and click on “Registration”

Phone and email verification

They will send you an SMS to the registered phone to place the verification code and give it confirmation. The same will happen with the email, in which they will send you an email with a link to confirm the account and activate it.

Advertisement

Account Verification

Once you have completed all the registration, you must verify your account, this is quite important that you do it so that you do not have limitations, it is a financial platform and as such, by regulation you must verify your identity and address.

  • For identity, you can do it through your ID, passport or other identity document, also a selfie with the document, you can support yourself by linking the mobile if you do not have a webcam.
  • In the case of the address, it would be verified with a bill for services such as electricity, water or other document where they can verify your location or residence, this is to raise the limits further.
  • For the card, you need to enter your card details and even take a photo and attach it.

Ideally, you should verify everything, but the first thing is the identity, in which you will be required name, surname, middle name in the case you have. Secondly, you will be asked to identify what type of document you are going to use to identify yourself, for example, the DNI.

After that, you must upload a photo of the front and back of the identity document, if you do not have them at hand, you can do it with your mobile and send it to you by mail or web whapsapp or another application, and then upload it from the computer.

Once this is done, it will request a selfie with specific details, where you must write down on a paper the word EXMO, followed by the date of the day of the photo and hold the DNI without covering anything, there you capture the photo and attach it, with these steps you will already be in the process of verifying the identity.

Likewise, you can do it to verify the address with a receipt and in the case of the card you must do the same, they are similar processes quite simple, the idea is that you complete the entire registration process.

Configuration

Another important point regarding registration is the security configuration in which you can add extra protection and have two-step authentication. Likewise, you can observe other options such as personal information, which you can review carefully.

Advertisement

Leave your vote

Continue Reading

Crypto

How to create an account on Poloniex step by step

In this article you will learn how to register with Poloniex in 2022, it is a cryptocurrency trading platform, where you can trade with margin or leverage and you can also do hodl. Here’s a step-by-step way to create an account on Poloniex.

Go to the official website of Poloniex

Access the Poloniex registration page to later follow the step by step that we will give you to register for free.

Select “Sing Up”

Once you are on the platform you must select in the left menu “Sing Up”, where you must enter the email and password, the latter you must confirm it. Additionally, you must place the referral code (optional), as well as accept the terms and policies that govern this page.

Verify your email

Once the previous form has been completed, you must check the email where a link will be sent for the purposes of verifying the email, in order to continue with the account registration process.

Account access

With the email and password data entered, we select “Log In” and access. Among the important things that there are is the “profile”, where you will have to verify your account.

Advertisement

If you want to apply margin for trading or leverage you must verify your profile in “Upgrade” you will be able to select other aspects that will help you verify your identity, you will probably be asked to upload a file, such as a photo of the DNI or an invoice to verify the address.

Then, in the event that you want to use the future option that allows margin up to one hundred leverage, you have to have verified these things.

This request is totally normal, since it is required by all financial platforms by legal issue, with this you would already have verified level 2 and with it you would not have any type of limit.

Right now, you could make all kinds of deposits, normal purchases with certain fairly high limits.

Two-factor authentication verification

To protect your account you can activate 2FA this is double authentication code, so you must enter a code apart from the password to be able to log in.

Advertisement

Leave your vote

Continue Reading

Crypto

How to Invest in Cryptocurrencies on Skrill

If you are one of those investors who do not like to deal with many complicated orders, but prefer to hold long-term, then Skrill is an excellent alternative for you. With the simplicity that characterizes it.

But the question is, how to invest in cryptocurrencies within Skrill? The answer will be shown in this article.

But first log in to your Skrill account, then you could already start the step by step that will be shown below.

Access Skrill’s Cryptocurrency Investment Options

Like any financial platform, Skrill puts at your disposal tools so that you can invest in cryptocurrencies within yourself, doing so in a simple and comfortable way. To access these tools, below, we will describe the following procedure:

  1. Within the home screen of your account, in the left sidebar, find and tap on Cryptocurrencies.

Important: It is likely that when you enter this section, you will be asked to accept some terms or similar.

Advertisement
  1. Once there, you are presented with different options in terms of cryptocurrencies. From among these, you will select Invest now, clicking on this option.

  1. Once you access that section, you will be shown an extensive list of existing cryptos in Skrill. In each of which, you are given a Trade option. If you click on any of these, you would enter their trading options.

  1. When you have entered the crypto you chose, you will see a Buy – Sell panel.

Ways to trade cryptocurrencies in Skrill.com

In this buy-sell panel or trading box, you will have some options that will allow you to perform these operations:

Steps to buy cryptocurrencies within Skrill

First of all, talking about the purchase of cryptocurrencies in the Instant mode (which is the usual one), you will be able to do the following:

  • Select the currency in which you want to buy cryptos.

  • Set the amount to spend that, for its purposes, must be a minimum of 10 EUR (You are also shown the balance you have available).

  • Select the cryptocurrency in which you are going to invest.

  • See what you are going to receive in cryptos in equivalence for what you have invested.

  • See the commission you will be charged for that transaction.

When you have everything ready, then you can click Next.

After this, you will be able to see the summary of the entire operation; you will be told everything you have added, such as the amount and what you would receive, and also the commission charge, which will be added to the total amount to be spent. If you agree with everything, you can click on Confirm.

Steps to Sell Cryptocurrencies within Skrill

There is not much to comment on in the case of selling your cryptos within Skrill, as they are basically the same steps as in the case of the purchase:

Advertisement
  • You establish the type of crypto that you are going to sell (and that logically, you should own).

  • You indicate the amount of cryptocurrencies to sell directly or, if you prefer, using the percentage indicators.

  • Select the currency in which you want to receive the funds in equivalence.

  • See how much you will receive, in the same way as the previous case.

Having this ready too, you would click Next.

Following this, you must also click on Confirm in a summary similar to that of the case of the purchase, where you will see important data with which, if you agree, you can proceed to the respective confirmation.

Some other options that Skrill gives you to trade

The options you have in Skrill to trade are very practical and easy to use. And for your convenience, they are not numerous. Here’s what you can find on Skrill for when you want to trade on it:

The Portfolio section

In this section you have at hand some useful things for your negotiations, such as:

  • The Watchlist, with which you can keep abreast of the indices of your cryptos in the market.

  • Alerts and orders. With these options you are given the possibility to mark an index within the cryptocurrency, which, if the price reaches it, this will be notified to your email or mobile, as you have it configured.

  • Recent activity. It is the section where you will get your last financial movements, when it comes to purchases and sales, as is logical.

The Trade section

Within this section, you can do what you are told below:

Advertisement
  • Visualization of Graphs. This will allow you to take a look at the stock market movement in a not at all complex interface (you can also see the current trend that the market has in terms of sellers and buyers).

As you can see, the trading system within Skrill is not complicated. They are few and simple options, but with the same utility for people like you who do not want to get too entangled in the stock market issue, but to play it safe, but in a simple way.

This tutorial summarizes it this way so that you have a general idea when investing in cryptocurrencies within Skrill.

Leave your vote

Continue Reading

Trending

Log In

Forgot password?

Forgot password?

Enter your account data and we will send you a link to reset your password.

Your password reset link appears to be invalid or expired.

Log in

Privacy Policy

Add to Collection

No Collections

Here you'll find all collections you've created before.