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