Options Jive

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Why & How to Keep a Bearish Bias

Options Jive

Tom is known for his permabear status – that is, he is almost always bearish on the broad equity market. Though some of this is owing to the fact that Tom constantly think the market is overvalued, a large part of his bearish bias comes from his large amount of short options trades. How do short options in the broad market indices like the S&P 500 require Tom to have short deltas in his account? This is the topic of conversation today!

Option prices on the broad market indices tend to rise as the price of the index itself falls. Thus, if Tom is short options, then he can take some pain out of rising option prices amid a market selloff by having a bearish bias to begin with. Tom and Tony talk more specifically about how bearish they tend to be and how they manage to create this bearish bias in their portfolios in today’s Options Jive. Take a peek at the segment above for some more specifics on this bearish bias conversation.

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