How to trade in a bear market. David Jaffee with beststockstrategy.com a lot of people over the
last four to five months have lost money because the market is down anywhere from 20 to 30 percent
and in this video we're going to discuss the best way to trade in a bear market so 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 for
you to profit in a bear market is to wait for the market to pull back by about 25 or 30 percent and
then just simply buy shares so that way you can participate in the upside because 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 or February 2018 or August 2015 there's been a lot of v-shaped bottoms and i
definitely think that one of the best things that you can do is buy the shares especially if you're
using portfolio margin of something like a QQQ or a tesla or microsoft or amazon especially now with
amazon trading at about 2200 and then just simply wait for that stock to appreciate in value you can
sell some covered calls against it although to be honest I'm not really a fan of cover calls and the
primary reason for that 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
so generally speaking i think 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 so 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 so i think that the best way to trade in a bear market
is to start out by trading far out of the money put options but to actually have the desire to
take ownership and to go along those shares at your strike price and then you can simply wait and
participate in the upside of the stock now 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 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
so i think 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
because remember when you sell option premium your maximum profit is going to be the initial
credit that you receive 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 or 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 David Jaffee with beststockstrategy.com please like comment share and subscribe watch
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