5 Ways to Profit in a Bear Stock Market

Author: James Clark

Don’t let a bear stock market stop you from holding back on your trades. Check out these 5 ways to profit in a bearish market.

Even though the stock market, always tends to go up at an index level over a long period, bear markets are inevitable. They hard to anticipate, and most traders can’t predict their impact on stock prices accurately. However, since they’re a natural part of market cycles, learning to position yourself to benefit from them can help you survive and thrive during economic downturns. Plus, many savvy stock investors use bear markets to boost and diversify their portfolios to lay the groundwork for sustained financial growth.

If you’re new to the trading world or looking to pick up some new tricks, keep reading to learn how to profit in a bear stock market.

What Is a Bear Stock Market?

A bear stock market happens when prices of financial assets and securities suddenly fall sharply, changing the overall investor sentiment and further entrenching the market’s performance. Stock investors become pessimistic as they anticipate losses, and begin their stocks to the highest bidder and cash out. Typically, a downturn of 20% or higher over at least two months is considered bearish by most market indexes, such as the S&P 500 and Dow Jones Industrial Average.

5 Ways to Profit in a Bear Market

1. Explore Stocks that Increase in Price

The first thing you should do is research past bear markets and determine which stocks, sectors, and securities survived the downturn or went up when others were tanking. Opt for companies with decent stock performance instead of speculative ones with unpredictable outcomes. Bad stocks tend to stay down during recessions while good stocks recover. For example, defensive stocks, like consumer staples, remain in demand no matter how bad things get.

2. Sell Naked Puts

Selling naked puts refers to getting rid of stocks that others want to buy in exchange for cash premiums. In bearish markets, there are many interested buyers looking for put contracts that expire below their strike prices. While this is risky, you can profit if the put expires above this price, meaning you can keep the entire premium at the end of the transaction.

3. Hunt for Dividents

A stock’s price is set through trading, i.e., buying and selling, an response to its demand and supply. However, a dividend comes from a company’s net income. By opting for companies that pay dividends, you can continue to get returns even when the stock’s price goes down.

4. Rotate Your Sectors

A bear stock market is a great opportunity to explore other sectors to come out on top when the recession is over. In bull markets, industries, such as home improvement, automobile manufacturing, travel & lodging, and consumer discretionary perform well. In bearish markets, stocks of companies that sell “needs” fare better. So, make sure you rotate your portfolio accordingly.

5. Carefully Utilize Margin

A margin is a powerful tool if you know how to use it properly. You can use it to invest in dividend-paying stocks. However, when re-investing margin, you don’t necessarily have to stick to the same stock. Diversify and mitigate your risk wisely.


If you’re looking for long-term growth, a bear stock market shouldn’t be a big problem if you know how to benefit from it. There are thousands of great stocks that come out of bearish markets so keep monitoring and exploring different companies. Once you have their vital

Stock Picks

1. Westlake Chemical Corporation (WLK)

2. Sunoco LP (SUN)

3. Tri Pointe Homes Inc. (TPH)

Find the top stock picks with guidance on when to sell, buy and further information by subscribing to the PT Premium Service in the Proficient Trader App