A bear market is defined as any large decline (of at least 20%) in a market that often leads to a much longer period of decline and consolidation. A good example of a bear market was the equity bear market of 2000-2002. From 1993-1999 the stock market indices rose 200%, thus creating a perception that the market would never go down. That perception led to the bubble in 2000 that ended with a two-year decline of 50-80% of stock values. The markets since rallied back to test those old 2000 highs in October of 2007 and have since fallen again into bear market territory by plummeting 50% to the recent lows seen in November of 2008.

The reality of these bear markets is that many investors took realized losses on stocks as margin calls forced them out of losing equity positions. The average impact of all equity bear markets since 1926 has been a 38% loss that took an average of 9 years to recover.

Currently, crude oil has entered a bear market. From the highs of $147/barrel in the summer of 2008, since then it has traded down some 75%. One of the challenges in trading a bear market is that the upward impulse moves tend to be quite sharp and vicious, thus squeezing out the short sellers. These moves are due to the increasing volatility of the underlying price moves. There are many option strategies that can be employed to take advantage of a bear market, including the purchase of "put options" and "put spreads".