How To Make Money In A Bear Market (Stock Market Guide) – Options Trading with David Jaffee
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How to Make Money in a Bear Market (Stock Market Guide)

How to make money in a bear market?

How to trade in a bear market.

A lot of people over the last four to five months have lost money because the market is down around 30%.

In this article we're going to discuss the best way to trade in a bear market.

I think that a lot of you expect me to say that it's best to sell options especially because this is a period of high volatility whether VIX is high and therefore you're going to be able to collect a significant amount of premium by selling out of the money options.

But I actually think that the best way to profit in a bear market is to wait for the market to pull back by about 30 percent and then just simply buy shares so that way you can participate in the upside.

Profit in a Bear Market

Bear Market investing strategies?

How to invest in a bear market?

If you remember, back in March 2020 where the market fell about 36 percent in 33 days, and then if you also look back at December 2018, February 2018 or August 2015 there's been a lot of "V-shaped bottoms".

definitely think that, during these sharp pullbacks and recoveries, one of the best things to do is to buy the shares, especially if you're using portfolio margin on an underlying stock / ETF like QQQ, Tesla, Microsoft or Amazon (especially now with Amazon trading at about $2,200 - as of May 25, 2022) and then just simply wait for that stock to appreciate in value.

You can then sell some covered calls against it, although to be honest I'm not really a fan of cover calls or the wheel strategy.

The primary reason that I'm not a fan of covered calls is that there are usually about 10 to 15 large up days every single year and by selling covered calls you're going to cap your upside and if the underlying stock shoots through that short call strike then you're not going to be able to participate in the upside of that stock. 

In general, I believe that the best way to trade and to make money during a bear market is to initially sell out of the money puts and then you should have the desire to actually take ownership of that stock at the strike price.

Therefore the biggest thing that you have to be careful about is making sure that you don't trade too big because remember when you're trading options there's a large volatility component and there's also a lot of sequence risk which means that there's going to be very high correlation where if one of your positions is getting challenged then it's very likely that another one of your positions is going to get challenged and you can rapidly run out of buying power - especially if you're trading too large and then you can be forced to close out positions at the most inopportune time.

Remember that the S&P usually generates a return of about 8% a year. If you're able to sell option premium on stocks that you want to own, and then take ownership of those stocks when they fall ~20%, then you should be able to easily crush the market returns.

So if you're looking for bear market investing strategies, how to invest in a bear market or how to make money in a bear market, then the steps are quite simple:

How to Make Money in a Bear Market

 believe that the the best way to trade in a bear market is to: 

1) Trade and sell far out of the money put options on quality companies with strong brands

2) Have the desire to own these companies if they get assigned

3) Participate in the upside of the stock

4) Buy options, for protection, during periods of complacency

There are some other things that you can do by looking at the volatility indices whether it's VIX or VVIX and there are some ways that you can mitigate your losses and these are things that I discuss in the option trading education course but I definitely think that one of the best things that you can do and one of the best ways that you can make money in a bear market is not to over trade because we all know that when you do over trade when you trade too large then you have a very high likelihood of potentially blowing up your account.

I believe that it's better to be disciplined and patient and once you're okay with owning that specific stock at that price then you can simply take ownership of it and then wait for the stock to recover and then you can participate in the upside on a dollar for dollar basis. 

Remember when you sell option premium your maximum profit is going to be the initial credit that you received so by actually taking ownership of the stock you're able to participate on a dollar for dollar basis if that stock goes up in value and when a stock falls, or an index falls, 30 percent in just a few months and especially if it's a large cap company, an index or a market-leader then history has shown us that there's a very high probability that that stock is going to rebound.

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Conclusion (Make Money in Bear Market)

In my opinion, the best way to make money in during a bear market is to sell puts, take ownership of stocks and buy options during periods of complacency.

Following this strategy, along with not trading too large, should allow you to beat the market.

Frequently Asked Questions (FAQs)

What's a Bear Market?

A bear market is defined by a prolonged drop in investment prices — generally, when prices fall by 20% or more from their most recent high.

How to profit in a bear market?

The best way is to have hedges already in place during periods of time when the market is strong and complacent.

Additionally, you can take ownership of high-quality stocks with strong brands after they've sold off by 20% - 30%. 

Can I Make Money In a Bear Market?

Yes, by not trading too large and by being disciplined and rotating into quality companies.

Also, by having hedges in place that were put on during periods of prosperity when the stock market was trading near its 52-week highs.

How Can I Learn More About Bear Market Trading?


Should I Trade Options During a Bear Market?

Yes, if done correctly, then trading options will enhance your returns and allow you to beat the market.

About the Author David Jaffee

I (David Jaffee) help people become consistently profitable traders while minimizing risk. I graduated from an Ivy League University and worked at some of Wall Street's most successful investment banks. Subscribe to my YouTube channel for valuable videos - BestStockStrategy YouTube Channel​. Finally, if you're looking to Land a Finance Job, then I've put together the best step-by-step course at My personal website is

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