Statistically speaking the best way to make money is by trading with the trend. This is because in a bull market 15 out of 20 stocks will follow the trend and this will give you the best odds of making money. In the same way in a bear market it is also best not to try and fight the trend but to go with the flow and either sell all your stocks and go to cash, or short the market.

However many people own stocks that they don't want to sell for various reasons, either tax or sentimental, so what can they do if the market appears to becoming a bear market?. Stock options can provide a number of different solutions, the most popular are called the Covered Call and the mostly unknown one called the Married Put. These use Call and Put options.

Option trading can be very confusing and difficult at 1st, actually it's not that complicated once you have had a good education in the subject. However if terms like Put and Call Option, Married Put and Covered Call don't mean anything to you, don't attempt to trade options until you get that essential education in the theory.

Selling calls against your stock in 100 share increments is the basis of the covered call strategy and it can provide about a 2-7% buffer against the loss in stock price. However a bigger drop in stock price will not be compensated for using the covered call strategy, in general.

As already mentioned the covered call system only has the potential to offer about 4-7% credit when the stock goes down. Stocks have been known to quickly lose anything from 10 to 30% in a matter of days or weeks and the covered call strategy offers little protection against this sort of loss.

The Married Put is the prefered way of protecting stocks, over the covered call, this is because it offers much larger protection. As the stock goes down, the Put will gain rapidly in value depending on it's delta value and strike price, these have to be selected carefully to match the stock, hence the term married Put.

There are a number of parameters that need to be considered when creating a Married Put for protection, the following list highlights the main points:

1. The strike price of the option

2. Stock price when the Put is bought

3. Whether to use in the money of out of the money options

4. Put expiration time

The last point is very important because the Put options that you buy only have a limited life and you need to consider for how long you need the protection. The big advantage of the Married Put strategy over the Covered Call strategy is that if selected correctly it can provide 90-95% loss protection in the event of a large drop in the stock price.

The downside of the good protection is that you have buy the Put which is a debit whereas the covered call is a credit. But there are ways of offsetting this expense and there is much more to this strategy when executed correctly. The Married Put can be made to pay for itself and used to generate very good gains if the market, or stock to be specific, moves a lot.

The general idea of the Collar Trade is to combine the covered call and married Put strategy into one, this is what is called the Collar Trade. In effect you put a collar around the stock, sell a call and buy a PUT. If you do this correctly most of the cost of the Put can be offset by the credit from the covered call so you can protect your valuable stock at almost no cost. Yes this is a great strategy which the general public is unfortunately very ignorant of, and most brokers don't understand.