Stock Investing Strategies

Stock investments

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Strategies for a Down Market

Bear markets have been occuring throughout history. In fact many of the same basic causes of the 1929 great depression have caused smaller bear markets leaving it to be an endless cycle of ups and downs. But they do not have to be bad things. They are simply cycles that occur now and then and just like bulls markets investors can profit from them.

Yes, it’s true one of the facts about the great depression of 1929 is that investors still made money, even in the terrible market crash. Traders can make money in a falling market by using one of these strategies.

1. Shorting Stocks

Short selling a security is something investors can do to sell a stock now and buy it back later on. Instead of buying stocks when they are cheap and selling them when they are expensive the idea is to sell them when they are expensive and then buy them back when they are cheap. If a stock goes down it can be a great way to take advantage of it.

2. Put Options

Another way to make money from a falling stock is to buy a put option. Put options give traders the right to sell a stock at a given price on or before a given expiration date. If the stock drops in value the put option will appreciate.

It is basically a way to gain leverage in the stock market while at the same time playing the downside. It can even be used to limit your risk because unlike shorting stocks you can only lose the amount that you put into it.

3. Selling Calls

Call options are the other side of the option chain. These allow investors to buy a stock at a specific price on or before a specific expiration date. You can sell call options but if you do you are obligated to sell the stock at a given price on or before the expiration date.

The idea is to sell call options at a strike price that the stock is not likely to exceed. As the stock stays below that price the option eventually expires making you money. However this can be the riskiest strategy so don’t attempt it unless you know what you are doing.

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