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Sean HymanSean Hyman
Keymaster
Post count: 3300

Let me start off by saying…trying to call a top and go against the prevailing upward momentum is a low probability trade, by default (whether it works out or not). I’m not referring to a bounce higher within a downtrend but where the medium-term trend is higher, like it is for IWM.

Now, to answer your question:

If you’re bearish on an asset, then you buy to open a put and then later, sell to close that put.

Puts that are bullish are the ones where you take in premium when selling to open the but BUT you know you run the risk of having the stock shares put to you. And if you’ve chosen correct, you wouldn’t mind having those shares put to you. If you were to close out that kind of a put trade, you’d buy to close (since you’d formerly sold to open). It takes the opposite action to close out a trade.