DATE: March 10, 2014
Can you define the term "bearish" and explain what it means for an investor to be "bearish" on the market?
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."