Contrarians like to fade trade, whereby they look for prices to reverse. Sharper moves in price, whether up or down, tend to be unsustainable, which makes them prime candidates for fade trades. In these cases, the trader wants prices to change direction since the current rally or decline is expected to end or see some short-term interruption.
Option sellers use these price spikes to sell puts into weakness in the underlying asset, and sell calls into strength in the underlying asset, due to the inflated prices of the respective options.
Option buyers prefer to buy calls into weakness in the underlying asset and buy puts on strength in the underlying asset, due to the reduced prices of the respective options.
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