The term bear market refers to a market condition in which the prices of securities are falling. This type of market is generally associated with investor pessimism. Most investors agree that a bear market occurs when prices decline at least 20 percent over a two month period. Below are some trading strategy tips to remember during a bear market so that your portfolio remains healthy.
Buy Puts
Buying puts is a typical bear market trading strategy. It gives investors a limited downside and, if done correctly, it also gives a high chance of reward. The maximum loss for investors using this trading strategy is the amount paid for the contracts. For investors to earn rewards, they need to correctly anticipate the date stock prices begin falling, as it will need to fall prior to the expiration date.
Buying puts is a typical bear market trading strategy. It gives investors a limited downside and, if done correctly, it also gives a high chance of reward. The maximum loss for investors using this trading strategy is the amount paid for the contracts. For investors to earn rewards, they need to correctly anticipate the date stock prices begin falling, as it will need to fall prior to the expiration date.
