A Dozen Ways to Survive a Bear Market

 Please note that this is a sister publication of WallStreetNewsNetwork ( https://WStNN.com ) and postings will end on this site shortly. Please go to https://WStNN.com for all future posts. 

by Fred Fuld III

It looks like we may be at the beginning of a bear market. If you want to profit from falling markets stock prices, there are several ways to do so.

Many strategies are available to profit from a bear market and a stock market crash, some of which are speculative, and some that don’t have much risk. It doesn’t matter what your account size is, there are ways to protect yourself, and even profit on the downside. Here are some of those techniques.

1. Sell a Vertical Call Option Spread

This strategy is a little complicated, but I listed it first, because it is one of the least risky, since your losses are limited, unlike many of the other techniques listed here. In addition, I listed it at the beginning, because I use this trading technique all the time.

If you are familiar with options, then selling a vertical call spread is a great way to make money when a stock drops while protecting yourself if the stock goes up. (This happens to be my favorite strategy.)

This involves shorting an out of the money call option and buying a further out of the money call option at the same time. If the stock drops or stays the same, you make money from the short call which exceeds the loss on the long call. If the stock goes up to the strike price of the short call, you still make a profit. It is only when the stock rises above the strike price of the short call that you begin losing money.

To make it simple, here is an example:

Stock is at 50

Sell (short)  one call with a strike price of 51 for 3 (an option that is trading at 3 means $300)

Buy one call with a strike price of 52 for 1 ($100)

If the stock drops to 45, the 51 call drops to $0 and you make $300 because you shorted it, and the 52 call drops to $0 losing $100 because you own or were long it, netting you a profit of $200.

If the stock rises from 50 to 100, you lose $4900 on the 51 call that you shorted, but you make $4800 on the one that you bought, so you only lose $100.

Generally, you want to use options that expire in 40 to 60 days, and close out your position in 15 to 25 days.

Disadvantages of the selling a vertical call spread

• Your profit is limited
• You need approval from your broker to do option spreads
• Both legs of the spread need to be placed simultaneously (easy to do with most trading platforms)
• May need to wait 25 or 30 days to see a profit

2. Shorting Stocks

This is one of the most speculative ways of making money in a bear market. In simple terms, you make money when the stock goes down and you lose money when the stock goes up. What technically happens is that you borrow the shares and immediately sell them (this all is done electronically through your brokerage firm) and since you owe those shares, you eventually have to buy them back at some price, hopefully a lower price, in order to return those shares. The difference between your sale price and eventual purchase price is your profit (or loss, if you buy back at a higher price).

Can you make a lot of money shorting stocks in a bear market? Yes. Is it speculative? Very. Can you lose a lot? Most definitely. This is why it is so risky. When you short a stock, the lowest point it can drop to is zero. Whereas, if the stock goes up, the amount it can rise is unlimited. Let’s say you short 100 shares of a stock at $20 a share. If you put up funds equal to 100% of the value of the shorted amount, and the stock drops to zero, you’ve made a 100% return. However, suppose the stock goes from 20 to 100, you end up losing 400% of your money with lots of margin calls along the way. This is called a short squeeze. But even on a short term basis, an investor can lose money very fast.

Unfortunately for those who do their trading in retirement accounts, such as IRAs, shorting stocks is not allowed.

So in summery, do I think you should short stocks? Absolutely not, unless you are a professional trader. The risk is almost infinite. If you understand options real well, hedged short selling might be OK (see the next strategy), as long as you are an advanced trader, and know what you’re doing.

3. Hedged Short Selling

Hedged short selling is a strategy whereby you short a stock and at the same time, you buy a close-to-the-money call option. That way, if the stock shoots up, you are protected with the call option. If the stock drops, you will lose what you paid for the option, but you will make money on your short stock position.

Example: you short 100 shares of a stock that is currently trading at 50 (so you short $5000 in stock), and you buy a call option with a strike price of 52 for 1 ($100).

The stock goes to 40. You make $1000 from the stock dropping from 50 to 40, and you lose the $100 you paid for the call option, with a net profit of $900.

The stock stays the same at 50. You don’t make any money on the short sale fo the stock and you lose $100 on the call option for a net loss of $100.

The stock goes up to 60. You lose $1000 on the short stock, but the value of the call option will increase from 1 to 10 ($100 to $1000), netting $900 on the difference, for an overall loss of $100.

In other words, in the example above, you can only lose $100, if the stock stays the same or goes up, but if the stock drops, the profit can be substantial.

Actually, to be more accurate, if the stock goes to 51 and stays there, you will lose $100 on the short stock sale and $100 on the call option, for a total maximum loss of $200. Even still, it may be worth the small loss in case you are wrong about a bear market.

Disadvantages of the hedged short selling

• You need approval from your broker to short stock and buy options
• Both positions should be placed simultaneously (easy to do with most trading platforms)

4. Short (Bearish) ETFs

The Exchange Traded Fund known as the Bearish ETF or Short ETF is another option. What these ETFs do is provide a return opposite to the return of the index, sector, or industry that it is tracking.

For example, the Short Dow30 ProShares (DOG) provides a return that is the inverse of the Dow Jones Industrial Average. If the Dow goes down 2%, the DOG is expected to up 2%. The Short QQQ ProShares (PSQ) ETF gives a return that is the inverse of the NASDAQ 100 Index.

The nice thing about these short ETFs is that your losses are limited. Also, if you are long individual stocks that you don’t want to sell, these can be good for protecting your overall portfolio on the downside.

5. Leveraged Bearish ETFs

If you like volatility, you will love the leveraged bearish ETFs. What these ETFs do is provide double, and in some cases triple the inverse return of indices.Some examples include the UltraShort Consumer Services ProShares (SCC) and the ProShares UltraShort S&P S&P 500 (SDS).

In addition there are several triple leveraged bearish ETFs. Direxion Daily MCSI Real Estate Bear 3X Shares (DRV), Direxion Daily Energy Bear 2X Shares (ERY), and ProShares UltraPro Short Russell 2000 (SRTY) are just a few of the many leveraged bearish ETFs.

The volatility of these ETFs is substantial, and so are the wide bid and asked spreads that I’ve seen occasionally.

The advantage of these trading vehicles is that they are a way of shorting on margin, with a limit on the downside. The disadvantage is that the losses can be quick and large, especially with the triple leverage short ETFs.

6. Bear Funds

It may be hard to believe, but there are actually a large number of bearish mutual funds for the long term bearish investors. These include the Grizzly Short Fund (GRZZX), the PIMCO StocksPlus TR Short Strategy Institutional Fund (PSTIX), and the ProFunds Bear Investors Fund (BRPIX). These funds have minimum investments ranging from $1,000 to $5,000,000.

7. Puts

First, a little about option pricing.  Puts and calls are priced on a per share basis, so a put at $1 would cost $100 for a 100 share option, or a call at $3.50 would cost $350.

A put is the option to put your stock to someone at a particular price within a certain period of time. In other words, if you own a stock that is trading at 22 and you buy a put at a dollar which gives you the right to put your stock to someone at $20 per share within three months, there are a couple of things that could happen. The stock could tank to $14 a share and you could put your stock at 20, or just resell the put for 6 (the difference between 14 and 20) and collecting the profit. You would be far better off than just doing nothing. And if the stock goes up or stays about the same, you are just out your $100 for the option. Puts can be useful for experienced traders.

8. Cash

There is another way to make money in a bear market. Sell everything, and keep your money in cash, with the safest way being a T-bill money market fund, that only owns T-bills. (Money market funds that invest in repos are supposed to be just as safe, but I consider them slightly more risky than T-bills.) The advantages are that you can’t lose money and you can receive an income from the investment.

The alternative cash investment is putting your money in a bank certificate of deposit or savings account. Your money is safe up to the FDIC limits, but the interest rate will be very low.

9. Anti ETFs (Bearish ETF of Popular Bullish ETFs)

The Anti-ETF is a new investment vehicle that has cropped up recently. The goal of these ETFs is to provide the reverse return of another popular actively managed exchange traded fund, as opposed to the bearish ETF which attempt to track the inverse of an index, like the ProShares Short S&P500 ETF (SH).

The most popular is the Tuttle Capital Short Innovation ETF (SARK), which has a goal of achieving the inverse of the return of the popular ARK Innovation ETF (ARKK) managed by Cathie Wood.

10. Anti Stocks (Bearish Single Stock ETFs)

Maybe there is a stock you want to short, but you don’t qualify for an account that allows shorting. Or maybe you want to short a stock in a retirement plan, such as an IRA. If you want to short a particular stock, such as Tesla, Nvidia, Paypal, Pfizer, or Nike (the AXS 2X NKE Bull Daily ETF (NKEL) would have been a good one today as it was down 12% today 9/30/22), there are ETFs which have a goal of returning the opposite return of a particular stock. 

11. Series I Bonds

If you think the bear market will last for a year or more, Series I bonds are the way to go. These bonds never drop in value and currently pay 9.62%. Plus, they are backed by the U.S. Government. For more information on these bonds, check out the article Series I Bonds Now Paying over 9%.

12. Selling Calls Against the Stocks You Want to Hold

You may have stocks in your portfolio that you want to keep fr one reason or another, such as not wanted to take a huge capital gain. In that case, you might want to consider writing calls against those stocks.

As you can see , you have plenty of options (no pun intended) for making money and preserving your capital in a bear market. There are obviously additional risks involved with shorting stock and options, which you need to delve into with your broker before utilizing those strategies. If we are in a bear market, hopefully you can protect your portfolio and make some money on the downside.

Disclosure: Author owns TSLA.

How to Protect Yourself in a Bear Market

Please note that this is a sister publication of WallStreetNewsNetwork ( https://WStNN.com ) and eventually everything on this site will be transferred over there.

by Fred Fuld III

There are several strategies to make money in a bear market, some speculative, and some not so risky. Even smaller investors have ways to protect themselves, and even make money on the downside. We have had a strong stock market for the last eleven years, and many investors think that we are heading into a bear market. Here are several strategies to choose from.

1. Shorting Stocks

This is one of the most speculative ways of making money in a bear market. In simple terms, you make money when the stock goes down and you lose money when the stock goes up. What technically happens is that you borrow the shares and immediately sell them (this all is done electronically through your brokerage firm) and since you owe those shares, you eventually have to buy them back at some price, hopefully a lower price, in order to return those hares. The difference between your sale price and eventual purchase price is your profit (or loss, if you buy back at a higher price).

Can you make a lot of money shorting stocks in a bear market? Yes. Is it speculative? Very. Can you lose a lot? Most definitely. This is why it is so risky. When you short a stock, the lowest point it can drop to is zero. Whereas, if the stock goes up, the amount it can rise is unlimited. Let’s say you short 100 shares of a stock at $20 a share. If you put up funds equal to 100% of the value of the shorted amount, and the stock drops to zero, you’ve made a 100% return. However, suppose the stock goes from 20 to 100, you end up losing 400% of your money with lots of margin calls along the way. But even on a short term basis, an investor can lose money very fast.

So in summery, do I think you should short stocks? Absolutely not, unless you are a professional trader. The risk is unbelievable. If you understand options real well, hedged short selling might be OK, as long as you are an advanced trader, and know what you’re doing.

2. Short (Bearish) ETFs

An ETF appeared on the scene several years ago which has become very popular, a type of Exchange Traded Fund called the Bearish ETF or Short ETF. What these ETFs do is provide a return opposite to the return of the index, industry, or sector that it is tracking.

For example, the Short Dow30 ProShares (DOG) provides a return that is the inverse of the Dow Jones Industrial Average. If the Dow goes down 2%, the DOG goes up 2%. The Short QQQ ProShares (PSQ) ETF gives a return that is the inverse of the NASDAQ 100 Index. If you are bearish on gold, you can buy the PowerShares DB Gold Short ETN (DGZ) ETF.

The nice thing about these short ETFs is that your losses are limited. Also, if you are long individual stocks that you don’t want to sell, these can be good for protecting your portfolio on the downside.

3. Leveraged Bearish ETFs

If you like volatility, you will love the leveraged bearish ETFs. What these ETFs do is provide double, and in some cases triple the inverse return of indices.Some examples include the UltraShort Consumer Services ProShares (SCC) and the ProShares UltraShort S&P S&P 500 (SDS).

In addition there are several triple leveraged bearish ETFs. Direxion Daily MCSI Real Estate Bear 3X Shares (DRV), Direxion Daily Energy Bear 3X Shares (ERY), and ProShares UltraPro Short Russell 2000 (SRTY) are just a few of the many 3X bearish ETFs. Several more of these triple bearish ETFs can be found at WStNN.com.

The volatility of these things is substantial, and so are the wide bid and asked spreads that I’ve seen occasionally.

The advantage of these trading vehicles is that they are a way of shorting on margin, with a limit on the downside. The disadvantage is that the losses are quick and large, especially with the triple leverage short ETFs.

4. Bear Funds

It may be hard to believe, but there are actually a large number of bearish mutual funds for the long term bearish investors. These include the Grizzly Short Fund (GRZZX), the PIMCO StocksPlus TR Short Strategy Institutional Fund (PSTIX), and the ProFunds Bear Investors Fund (BRPIX). These funds have minimum investments ranging from $1,000 to $5,000,000.

5. Puts

First, a little about option pricing.  Puts and calls are priced on a per share basis, so a put at $1 would cost $100 for 100 shares, or a call at $3.50 would cost $350.

A put is the option to put your stock to someone at a particular price within a certain period of time. In other words, if you own a stock that is trading at 22 and you buy a put at a dollar which gives you the right to put your stock to someone at $20 per share within three months, there are a couple of things that could happen. The stock could tank to $14 a share and you could put your stock at 20, or just resell the put for 6 and collecting the profit. You would be far better off than just doing nothing. And if the stock goes up or stays about the same, you are just out your $100 for the option. Puts can be useful for experienced traders.

6. Cash

There is one other way to make money in a bear market. Sell everything, and keep your money in cash, with the safest way being a T-bill money market fund, that only owns T-bills. (Money market funds that invest in repos are supposed to be just as safe, but I consider them slightly more risky than T-bills.) The advantages are that you can’t lose money and you can receive an income from the investment.

The alternative cash investment is putting your money in a bank certificate of deposit or savings account. Your money is safe up to the FDIC limits, but the interest rate can be very low.

If we are in a bear market, hopefully you can protect your portfolio and make a little on the downside.

Author does not own any of the above mentioned securities.

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6 Ways to Make Money in a Stock Market Crash

There are lots of ways to make money from a falling stock market, some speculative, and some not so risky. It’s great that these options are available, because small investors need a way to protect themselves, and even make money on the downside. Many traders and investors believe that the stock market has reached a peak. Here are several options to choose from.

1. Shorting Stocks

OK, let’s get this one over with first because it is one of the most speculative and risky ways of making money in a bear market. In simple terms, you make money when the stock goes down and you lose money when the stock goes up. What technically happens is that you borrow the shares and immediately sell them (this all is done electronically through your brokerage firm) and since you owe those shares, you eventually have to buy them back at some price, hopefully a lower price. The difference between your sale price and eventual purchase price is your profit.

Can you make a lot of money shorting stocks in a bear market? Yes. Is it speculative? Very. Can you lose a lot? Most definitely. This is why it is so risky. When you short a stock, the lowest point it can drop to is zero. Whereas, if the stock goes up, the amount it can increase is unlimited. Let’s say you short 100 shares of a stock at $20 a share. If you put up funds equal to 100% of the value of the shorted amount, and the stock drops to zero, you’ve made a 100% return. However, suppose the stock goes from 20 to 100, you end up losing 400% of your money with lots of margin calls along the way.

Have I shorted stocks? Yes. Have I made money from shorting? Yes. Have I lost a big chunk of my profits by closing out my short positions and going long, trying to predict the bottom? In the interest of full disclosure, yes. Several years ago, I made the second worse decision I could have made when shorting, and that is predicting the bottom of the market too soon. The worst decision would have been to hold on to my short positions after the market bottomed and started to make a quick rise. Often when the market bottoms at the end of a bear market, the rise is very sharp and fast, and can totally wipe out short position profits very quickly and then some.

Just before the big crash several years ago, shortly after I shorted a high priced stock selling for about $100 a share, the position went against me by 13 points. That’s a $1,300 loss for just one hundred shares in one day! I still had the short position after the market closed, and had the pleasure of trying to sleep at night, wondering if there was going to be a takeover the next morning or some other good news that would drive the price even higher, making my losses worse. Fortunately, the stock crashed along with the rest of the stock market and I ended up making a profit, but it was very stressful waiting for it to happen.

One way to hedge yourself is buy buying a call option on the stock you sorted, to protect yourself in the event the stock rises.

So in summery, do I think you should short stocks? Absolutely not. The risk is unbelievable. If you understand options real well, hedged short selling might be OK, as long as you are an experienced trader, and know what you’re doing.

2. Short (Bearish) ETFs

There is a type of Exchange Traded Fund called the Bearish ETF or Short ETF. What these ETFs do is provide a return opposite to the return of the index, sector, or industry that it is tracking.

For example, the Short Dow30 ProShares (DOG) provides a return that is the inverse of the Dow Jones Industrial Average. If the Dow goes down 2%, the DOG goes up 2%. The Short QQQ ProShares (PSQ) ETF gives a return that is the inverse of the NASDAQ 100 Index. If you are bearish on gold, you can buy the PowerShares DB Gold Short ETN (BGZ) ETF.

The nice thing about these short ETFs is that your losses are limited. Also, if you are long individual stocks that you don’t want to sell, these can be good for protecting your portfolio on the downside.

3. Leveraged Bearish ETFs

If you like volatility, you will love the leveraged bearish ETFs. What these ETFs do is provide double, and in some cases triple the inverse return of indices. One example is the UltraShort Telecommunications ProShares (TLL), the Rydex Inverse 2x S&P Select Sector Health (RHO), the UltraShort Consumer Services ProShares (SCC) and the Rydex Inverse 2x S&P Select Sector Tech (RTW).

In addition there are over a dozen triple leveraged bearish ETFs. Talk about price moves! The volatility of these things is unbelievable, and so are the wide bid and asked spreads that I’ve seen occasionally.

The advantage of these trading vehicles is that they are a way of shorting on margin, with a limit on the downside. The disadvantage is that the losses are quick and large, especially with the triple leverage short ETFs.

4. Bear Funds

It may be hard to believe, but there are actually a large number of bearish mutual funds for the long term bearish investors.

There are many bearish mutual funds, including the Grizzly Short Fund (GRZZX), the PIMCO StocksPlus TR Short Strategy Institutional Fund (PSTIX), and the ProFunds Bear Investors Fund (BRPIX). These funds have minimum investments ranging from $1,000 to $5,000,000.

I’m not sure why anyone would invest in these unless it is for some kind of a long term hedge.

5. Puts

A put is the option to put your stock to someone at a particular price within a certain period of time. In other words, if you own a stock that is trading at 22 and you buy a put at a dollar [puts and calls are priced on a per share basis, so a put at $1 would cost $100 for 100 shares] which gives you the right to put your stock to someone at $20 per share within three months, there are a couple of things that could happen. The stock could tank to $14 a share and you could put your stock at 20, or just resell the put for 6. You would be far better off than just doing nothing. And if the stock goes up or stays about the same, you are just out your $100 for the option. Puts can be useful for experienced traders.

6. Cash

There is one other way to make money in a bear market. Sell everything, and keep your money in cash, preferably a T-bill money market fund, that only owns T-bills. (Repos are supposed to be just as safe, but these days, I would look for the ones that just own the T-bills. I will cover repos in another article.) The advantages are that you can’t lose money and you can receive an income from the investment.

Hopefully, this post will provide you with some ideas to hedge your portfolio in the event the stock market does tank, and maybe even make money from the market drop.

Disclosure: Author didn't own any of the above at the time the article was written.

5 Ways to Protect Yourself From a Stock Market Crash

Don't be the fish in a Bear Market

The first day of this year, 2016, the stock market tanked. As I write this on Wednesday, January 6, the Dow Jones Industrial Average is down 237 points.

If you are concerned about the stock market and you think we are heading into a bear market, there are certain ways to protect yourself on the downside.

Here is a list of five ways to trade which can provide some protection during a period of falling stocks.

Short Stocks 

1. You can short stocks. If you have never shorted a stock before, this is what happens in simple terms. You borrow stock, you sell the stock, and eventually you have to buy the stock back eventually to return the stock that was borrowed, hopefully at a much lower price. (You don't actually see all this happening; it all happens electronically.) The different between what you sale the stock for and the price you buy it back is your profit (or loss). Traders should be aware that this can be a very risky trade and the potential loss from selling short is infinite.

Buy Put Options 

2. You can buy put options to protect stocks that you currently own, or you can buy a put on a stock you believe is going to drop. A put is the right to sell a stock at a certain price within a set period of time.

Here is an example. A stock is trading at 50, you buy a put with a strike price of 49. The strike price is the price at which you can put the stock to someone. You pay 1 for the option. If the stock drops to 45, your one dollar option increases to at least 4 (the difference between the 49 and the 45). If the stock closes at 49 or higher, then the option expires worthless, so your loss is limited to the cost of the put.

Writing Covered Calls

3. Writing calls against your stocks is one way to help protect your portfolio on the downside. Maybe you don't want to sell out of you stock positions, but you want some way to help reduce the loss on the downside. You can write covered calls. There is the chance that your stock could get called away if the stock starts to rally, but it just means that you made money on the transaction.

An example would be if the stock sells at 50 and you write a call with a strike price of 51 for 1. If the stock remains at the same price at option expiration, you make 1 per share. If the stock goes up to 53, you will get called away at 51 making 1 on the stock plus you collect another 1 for the sold option, for a total profit of 2. If the stock drops to 47, you lose 3 on the stock but you make 1 on the sold call for a net loss on 2. Without the written call, your net loss would be 3 on the stock.

Bearish ETFs 

4. Bearish exchange traded funds, also known as Bearish ETFs are investments that have a goal of providing the daily inverse of a stock index. The bearish ETFs are very volatile investments that are designed for short term trading, and not as long term investments. They achieve their performance through the use of various financial instruments including futures contracts, options,  collars, swap agreements, short positions, and other derivatives.

Double and Triple Bearish ETFs 

5. Double and triple bearish ETFs can provide a 200% or 300% opposite return of a sector or market. Listed at WallStreetNewsNetwork.com are over a dozen commonly traded triple bearish ETFs which investors can use to get a 300% play.

An example is the Direxion Daily S&P 500 Bear 3X Shares ETF (SPXS). This ETF has the goal of making 300% of the inverse of the performance of the S&P 500. What that means is, if the S&P 500 drops 2% in one day, the ETF should go up in value by 6%. Alternatively, if the S&P 500 rises by 2%, the ETF should drop by 6%, which would be a significant loss.

Another one of the bear market protection tools is an ETF called the ProShares Trust UltraPro Short QQQ ETF (SQQQ). The goal of this fund is to replicate three times the inverse of the NASDAQ 100 index using various types of derivatives. An example of what that means is that if the stock market, in terms of the NASDAQ 100 drops by 1%, this ETF should rise by 3%.

This index includes such stocks at Amgen (AMGN), Apple (AAPL), Baidu (BIDU), Cisco (CSCO), eBay (EBAY), Facebook (FB), Google (GOOG), Intel (INTC), Microsoft (MSFT), Netflix (NFLX), Starbucks (SBUX), Tesla (TSLA), Whole Foods (WFM), and Yahoo (YHOO).

Investors can be more specific in terms of what sectors will drop, or will drop the most. If you think energy stocks will tank, you could buy the Daily Energy Bear 3X Shares ETF (ERY), which attempts to track 300% of the inverse of the Energy Select Sector Index. For financial services companies, an option is the Daily Financial Bear 3X Shares ETF (FAZ).

For those that are bearish on gold, a triple bearish gold ETF called the Daily Gold Miners Bear 3X Shares ETF (DUST) is available. The ETF's objective is to make 300% of the opposite of the NYSE Arca Gold Miners Index.

For a free list of the most commonly traded triple bearish ETFs which can be downloaded, go to WallStreetNewsNetwork.com.

Just remember that losses on the double and triple bearish can be substantial when the stock market rises.

One other option is to just ride out the market drops. Let's hope for a nice bull market for this year.

Disclosure: Author has various positions, including bullish, bearish, and neutral option positions, in DIS, AAPL, EBAY, YHOO, and TWTR.

By Stockerblog.com

Protect Yourself From Crashing Stock Markets with the SQQQ ETF

Last Friday morning at 8am, I wrote an article called 5 Ways to Protect Yourself in a Bear Market. Since then, the stock market has, well to put it bluntly, crashed. Using the Dow Jones Industrial Average (since that is the index that the media likes to use), by the end of the day on Friday, the index was down over 530 points. Then yesterday, Monday, the stock market was down 588 points (and had actually dropped around 1100 points intra-day). Today, the market tanked again, falling over 200 points. Hopefully, you did something to protect your portfolio.

One of the bear market protection tools is an ETF, an exchange traded fund, called the ProShares Trust UltraPro Short QQQ ETF (SQQQ). The goal of this fund is to replicate three times the inverse of the NASDAQ 100 index using various types of derivatives. What that means is that if the stock market, in terms of the NASDAQ 100 drops by 1%, this ETF should rise by 3%.

This index includes such stocks at Amgen (AMGN), Apple (AAPL), Baidu (BIDU), Cisco (CSCO), eBay (EBAY), Facebook (FB), Google (GOOG), Intel (INTC), Microsoft (MSFT), Netflix (NFLX), Starbucks (SBUX), Tesla (TSLA), Whole Foods (WFM), and Yahoo (YHOO).

Since the close last Thursday, SQQQ has risen from 24.33 to 31.10, an increase of 27%. The nice thing about using an ETF such as this is that you don't have to short stocks, you don't have to use options, and you don't have to use margin. Not a bad over three business days.

However, you should be aware that if the market goes against you, in this case if the market rises, your loss on the ETF can be substantial. If the market goes up 1%, you would lose 3% on the ETF.

The triple bearish ETFs are just another tool at your disposal to protect your portfolio and make money when stocks drop. They should only be used on a short term basis. For a free list of other triple bearish ETFs, go to WallStreetNewsNetwork.com.

5 Ways to Protect Yourself in a Bear Market

Don't be the fish

Disney (DIS) is down 19% in the last two and a half weeks. Just in the last month, Apple (AAPL) tanked 15%. Twitter (TWTR) puked over 27% in the same time frame. If this scares you and you believe we are entering a bear market, there are ways to protect yourself.

There are actually several ways to protect yourself and even make money from a stock market that is going down. Here is a list of five ways to trade during a period of falling stocks.

Short Stocks 

1. You can short stocks. If you have never shorted a stock before, this is what happens in simple terms. You borrow stock, you sell the stock, and eventually you have to buy the stock back eventually to return the stock that was borrowed. Traders should be aware though that the potential loss from selling short is unlimited.

Buy Put Options 

2. You can buy put options to protect stocks that you currently own, or just as a trade on a stock you believe is going to drop. A put is the right to sell a stock at a certain price within a set period of time.

Here is an example. A stock is trading at 50, you buy a put with a strike price of 49. The strike price is the price at which you can put the stock to someone. You pay 1 for the option. If the stock drops to 45, your one dollar option increases to at least 4 (the difference between the 49 and the 45). If the stock closes at 49 or higher, then the option expires worthless.

Writing Covered Calls

3. Writing calls against your stocks is one way to help protect your portfolio on the downside. Maybe you don't want to sell out of you stock positions, but you want some way to help reduce the loss on the downside. You can write covered calls. There is the chance that your stock could get called away if the stock starts to rally, but it just means that you made money on the transaction.

An example would be if the stock sells at 50 and you write a call with a strike price of 51 for 1, if the stock remains at the same price at option expiration, you make 1 per share. If the stock goes up to 53, you will get called away at 51 making 1 on the stock plus you collect another 1 for the sold option, for a total profit of 2. If the stock drops to 47, you lose 3 on the stock but you make 1 on the sold call for a net loss on 2. Without the written call, your net loss would be 3 on the stock.

Bearish ETFs 

4. Bearish exchange traded funds, also known as Bearish ETFs are investments that have a goal of providing the daily inverse of a stock index. The bearish ETFs are very volatile investments that are designed for short term trading, and not as long term investments. They achieve their performance through the use of various financial instruments including futures contracts, options,  collars, swap agreements, short positions, and other derivatives.

Double and Triple Bearish ETFs 

5. Double and triple bearish ETFs can provide a 200% or 300% opposite return of a sector or market. Listed at WallStreetNewsNetwork.com are over a dozen commonly traded triple bearish ETFs which investors can use to get a 300% play.

An example is the Direxion Daily S&P 500 Bear 3X Shares ETF (SPXS), which happens to be up 4% today. This ETF has the goal of making 300% of the inverse of the performance of the S&P 500. What that means is, if the S&P 500 drops 2% in one day, the ETF should go up in value by 6%. Alternatively, if the S&P 500 rises by 2%, the ETF should drop by 6%, which would be a significant loss.

Investors can be more specific in terms of what sectors will drop, or will drop the most. If you think energy stocks will tank, you could buy the Daily Energy Bear 3X Shares ETF (ERY), which attempts to track 300% of the inverse of the Energy Select Sector Index. For financial services companies, an option is the Daily Financial Bear 3X Shares ETF (FAZ).

For those that are bearish on gold, a triple bearish gold ETF called the Daily Gold Miners Bear 3X Shares ETF (DUST) is available. The ETF's objective is to make 300% of the opposite of the NYSE Arca Gold Miners Index.

For a free list of the most commonly traded triple bearish ETFs which can be downloaded, go to WallStreetNewsNetwork.com.

Disclosure: Author has positions in DIS, AAPL, and TWTR.

By Stockerblog.com

Four Ways to Make Money in a Bear Market

Don't be the fish

If you think we are in for a stock market crash or at least a major correction, you are probably looking for a way to make money from a falling stock market. Here are a few ways.

Short Stocks

1. You can short stocks, however, the potential loss is unlimited.

Buy Put Options

2. You can buy put options. A put is the right to sell a stock at a particular price within a certain period of time. The issue with these is that they can have a fast approaching expiration, and if they aren't in-the-money at the time of expiration, it will result in an entire loss of the investment. Plus, for novice investors, options may be difficult to understand.

Bearish ETFs

3. So what is left? Bearish exchange traded funds, also known as Bearish ETFs. These are investments that have a goal of providing the daily inverse of a stock index. Some of these ETFs have an objective of 100% of the reverse performance. These are extremely volatile investments that are designed for short term trades, not long term investments. They achieve their performance through the use of various financial instruments including futures contracts, options, equity caps, collars, floors, swap agreements, short positions, and reverse repurchase agreements.
 

Double and Triple Bearish ETFs 

4. Double and triple bearish ETFs can multiply your profits (or losses) which can provide a 200% or 300% opposite return of the market. According to WallStreetNewsNetwork.com, there are over a dozen commonly traded triple bearish ETFs available for investors.

One popular one is the Direxion Daily S&P 500 Bear 3X Shares ETF (SPXS), which attempts to produce 300% of the inverse of the performance of the S&P 500. In other words, if the S&P 500 drops 2% in one day, the ETF should go up in value by 6%. Of course, if the S&P 500 rises by 2%, the ETF will drop by 6%, a significant loss. So it is worth repeating, these are extremely risky investments.

Investors can be more specific in terms of what sectors will drop, or will drop the most. For example, suppose you think energy stocks will tank. There is the Daily Energy Bear 3X Shares ETF (ERY), which attempts to track 300% of the inverse of the Energy Select Sector Index. Think bank and financial services companies are overpriced and due for a drop? There is the Daily Financial Bear 3X Shares ETF (FAZ).

There is even a triple bearish gold ETF called the Daily Gold Miners Bear 3X Shares ETF (DUST), with an interesting stock symbol. Its objective is to produce 300% of the opposite of the NYSE Arca Gold Miners Index.

For a free list of the most commonly traded triple bearish ETFs which can be downloaded, go to WallStreetNewsNetwork.com.

Disclosure: Author didn't own any of the above at the time the article was written.
 
By Stockerblog.com

How to Speculate on a Market Drop Without Options or Shorting

Investors who may be anticipating an October stock market crash have a few options. One way is to short the market, however, the potential loss is unlimited. Another way is to buy put options. However, these have fast approaching expirations, and if they aren't in-the-money at the time of expiration, it will result in an entire loss of the investment. Plus, for novice investors, options may be difficult to understand.
So what is left? Bearish exchange traded funds, also known as Bearish ETFs. These are investments that have a goal of providing the daily inverse of a stock index. Some of these ETFs have an objective of 100% of the reverse performance, and some can provide a 300% opposite return. These are extremely volatile investments that are designed for short term trades, not long term investments. They achieve their performance through the use of various financial instruments including futures contracts, options, equity caps, collars, floors, swap agreements, short positions, and reverse repurchase agreements.
According to WallStreetNewsNetwork.com, there are over a dozen commonly traded triple bearish ETFs available for investors. One popular one is the Daily S&P 500 Bear 3X Shares ETF (SPXS), which attempts to produce 300% of the inverse of the performance of the S&P 500. In other words, if the S&P 500 drops 2% in one day, the ETF should drop 6%. Of course, if the S&P 500 rises by 2%, the ETF will drop by 6%, a significant loss. So it is worth repeating, there are extremely risky investments.
Investors can be more specific in terms of what sectors will drop, or will drop the most. For example, suppose you think energy stocks will tank. There is the Daily Energy Bear 3X Shares ETF (ERY), which attempts to track 300% of the inverse of the Energy Select Sector Index. Think bank and financial services companies are overpriced and due for a drop? There is the Daily Financial Bear 3X Shares ETF (FAZ).
There is even a triple bearish gold ETF called the Daily Gold Miners Bear 3X Shares ETF (DUST). Take a look at its stock ticker symbol! It's objective is to produce 300% of the opposite of the NYSE Arca Gold Miners Index.
For a free list of the most commonly traded triple bearish ETFs which can be downloaded, go to WallStreetNewsNetwork.com.
Disclosure: Author didn't own any of the above at the time the article was written.
By Stockerblog.com

How to Make Money in a Falling Stock Market

In bear markets, there are several ways of making money, but most are speculative. Examples include shorting stocks (where your potential for loss is unlimited) and buying puts (which are very volatile and have expiration dates). However, there is a less risky way of playing the market on the short side, and that is through the use of bearish exchange traded funds also known as ETFs.

An example is ProShares Short Dow30 (DOG), an ETF which invests in derivatives with a goal of the inverse of the daily performance of the Dow Jones Industrial Average Index. This ETF was up 1.6% during the last month, versus the Trading-Inverse Equity category which was down 7.48% and the S&P 500 was down 1.13%.

If you are negative on NASDAQ stocks, you may want to consider the ProShares Short QQQ (PSQ) ETF, which has a goal of attempting to achieve the opposite of the daily performance of the NASDAQ-100 Index. The ETF is up 0.98 for the last month.

For investors who think that small cap stocks are in for a continuing downturn, the ProShares Short SmallCap600 (SBB) is an option. This ETF attempts to achieve the inverse of the daily performance of the S&P SmallCap 600 Index. The ETF was up 1.12% for the latest month.

Some investors that are bearish and want some real action have the option of using leveraged bearish ETFs. These ETFs can provide twice or three times the the return of an unleveraged ETF. The Direxion Daily Financial Bear 3X Shares (FAZ) has a goal of achieving 300% of the inverse of price performance of the Russell 1000 Financial Services Index. The ETF had an increase of 7.06% for the last month.

One issue to be aware of when investing in these ETFs is that over long periods of time, they may not even come close to matching the inverse of of the index. These ETFs are generally designed to achieve their goals on a day by day basis.

If you like bearish ETFs, you can get a free list of Short ETFs and a second list of Leveraged Short ETFsat WallStreetNewsNetwork.com.

Author does not own any of the above.

By Stockerblog.com

Protect Your Portfolio with Bearish ETFs

Some investors have made some profits, want to hold on to their shares, but don't want to lose their gains if the market tanks. There are several ways of protecting a portfolio, including buying puts, shorting similar stocks, or just selling the stocks outright. However, there is an alternative, the bearish ETFs, also known as short ETFs.

An ETF or Exchange Traded Fund is structured to track various stock indices or the inverse of various stock indices. Most are traded on the American Stock Exchange. To get more bang for your buck, there are over 40 bearish ETFs that are leveraged, according to WallStreetNewsNetwork.com. These leveraged bearish ETFs cover numerous sectors, industries and sub-industries.

For example, if you own a lot of telecom stocks, you could by UltraShort Telecommunications ProShares (TLL) which was up 15.19% for the last three months. The ETF attempts to match twice the inverse of the daily performance of the Dow Jones U.S. Select Telecommunications index.

If you own a lot of mid-cap stocks, you could consider buying the Rydex Inverse 2x S&P MidCap 400 (RMS) which has a goal of matching the inverse daily performance of the Mid Cap 400 Index. The ETF is down 15% for the last three months.

For downside protection of a general portfolio, you could take a look at the UltraShort S&P500 ProShares (SDS) ETF which was down 13.22% for the latest three months. It tries to achieve twice the inverse of the daily performance of the S&P 500 index.

For a list of over 40 leveraged bearish ETFs, go to WallStreetNewsNetwork.com. Jut be careful about investing in these, as they may not always perform the way they are supposed to. They are primarily designed for short term index tracking as opposed to long term tracking.

Author does not own any of the above.

By Stockerblog.com

ETFs that Go Up when the Market Drops, and Pays a Dividend

There are a couple Exchange Traded Funds or ETFs, which go up when the stock market drops, and on top of that, they pay a dividend. These ETFs could be an interesting way of hedging your portfolio.

One of the ETFs is UltraShort Utilities ProShares (SDP), which utilizes futures contracts, options, forward contracts, swap agreements and similar instruments to seek a return that is twice the inverse of the daily performance of the Dow Jones U.S. Utilities index for a single day. This means that when utilities drop, this ETF should increase in price.

SDP pays a small yield of 0.31%, with dividends being paid since June 2007. A large portion of the dividend payouts are generally due to capital gains. Although payments were made in June and December of last year, there is no guarantee that dividends will be paid in the future.

The performance for last year was down, primarily because of the strong move in in utilities and stocks in general since March of last year. However, it has far outperformed the bear market category year-to-date, for 3 months, one year, and 3 years. If you consider investing in this type of ETF, remember that it is designed to provide a return on a daily basis, not long term, and not for income.

Another bearish ETF which pays a dividend is UltraShort Telecommunications ProShares (TLL), which has a yield of 0.47% based on its latest dividend payment. It attempts to achieve twice the inverse of the daily performance of the Dow Jones U.S. Select Telecommunications index, in other words, twice the opposite return of telecom stocks. This ETF doesn't have as long a dividend track record as SDP and it has outperformed the Bear Market Index for one month, year-to-date, and one year.

If you like bearish ETFs, you can get a free list of Short ETFs at WallStreetNewsNetwork.com.

Author does not own any of the above.

By Stockerblog.com