Ask the Institute

DATE: March 10, 2014

QUESTION:

Can you define the term "bearish" and explain what it means for an investor to be "bearish" on the market?

ANSWER:
The term "bearish" has two distinct, yet related meanings. First, the term "bearish" describes a general feeling an investor may have that a particular stock or market index will fall in price. And, second, "bearish" can be used to describe a position that increases in value when the price of the underlying security falls in price.

A person, for example, is considered "bearish on the market" or "bearish on a particular stock" if he or she thinks the market or a particular stock will fall in price in the near future. Examples of "bearish positions" are short stock, long a put option and short a call option, because these positions tend to profit if the underlying security falls in price. To learn more about the term bearish, view this segment of "Ask the Institute."