Which option strategies work in a moderate downtrend?
Topping out, or a quiet downward drift
What fits a topping market or a quiet drift lower?
Topping out or a quiet drift lower supports two different approaches. A bear call spread sells premium above the market and earns on time decay while nothing rises. A bear put spread buys the move down with defined risk. An uncovered short call collects more premium and carries unlimited risk.
Strategies that suit this market phase
5 of the Academy's 30 strategies list this market phase. Every strategy links to its full explanation and worked example.
- Direction
- bearish / neutral
- Max profit
- C
- Max loss
- unlimited
- Risk defined
- Legs
- 1
- Level
- 4
- Experience
- Advanced
- Direction
- bearish / neutral
- Max profit
- C
- Max loss
- W - C
- Risk defined
- Legs
- 2
- Level
- 3
- Experience
- Intermediate
- Direction
- bearish
- Max profit
- W - D
- Max loss
- D
- Risk defined
- Legs
- 2
- Level
- 3
- Experience
- Beginner
- Direction
- neutral with a directional tilt
- Max profit
- narrow width minus the debit, or narrow width plus the credit, at the middle strike
- Max loss
- (W_breit - W_eng) - C
- Risk defined
- Legs
- 3
- Level
- 3
- Experience
- Advanced
- Direction
- moderately bearish
- Max profit
- by simulation only
- Max loss
- approximately the debit
- Risk defined
- Legs
- 2
- Level
- 3
- Experience
- Advanced
What a moderate downtrend looks like
A moderate downtrend means price has run out of momentum at the top, is printing lower highs, or is giving ground slowly — but it is not a crash. This phase is harder to trade than its mirror image on the upside, because implied volatility usually starts rising as it develops, which makes options more expensive to buy.
That is exactly what creates the choice between two routes. A bear call spread sells premium above the market and is paid by time decay: it wins even if nothing happens at all. A bear put spread buys the move and is paid by direction: it needs price to actually fall, and in exchange it participates if the fall continues. Both have defined risk. The uncovered short call does not.
The standard mistake is confusing moderate with strong. A bear call spread on a stock that then collapses earns its maximum — and a bear put spread would have earned a multiple of it. In the other direction, a put bought into a market that simply goes flat costs the entire premium.
Read on
Other market phases
This material is general information about option strategies, written for a general audience. It is not investment advice, not a recommendation, and not financial analysis. Options can lose their entire value, and uncovered positions can lose more than the amount committed. Anything said about tax is general in nature and is no substitute for professional tax advice. Last reviewed: 2026-08-06.