Founded in by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. Over the long run, the stock market trends upward yes, this is still true to reflect corporate earnings and dividend growth. But we've all been reminded in the past year that in the short run, stocks can go down -- sometimes quite sharply.

Obviously, someone profited from this recent downturn; those who bet against the market likely made out pretty well.

While few among us can expect to profit that handsomely from betting against the market, we do have a number of tools available to make money in a down market. Let me "put" it to you this way The simplest way to bet against a stock is to buy put options. To review, buying a put option gives you the right to sell a given stock at a certain price by a certain time.

For that privilege, you pay a premium to the seller "writer" of the put, who assumes the downside risk and is obligated to buy the stock from you at the predetermined price.

OK, let's try an example to illustrate. This leverage allows you to reap outsized rewards if you're correct; if you're wrong, the most you'll lose is the premium paid. The put strategy also allows you to make bearish bets against indexes and sectors by buying puts on exchange-traded funds that track them.

For instance, if you're down on tech, you can buy puts on the Nasdaq tracking PowerShares QQQ ETF, instantly betting against the index led by tech titans like Apple NASDAQ: AAPL , Google NASDAQ: GOOG , and Microsoft NASDAQ: Why not just short?

Trump adviser Carl Icahn bets against the Trump rally - Mar. 7,

Buying puts has its advantages over outright shorting a stock -- where you borrow stock from a broker with the hope of buying it back at a lower price and keeping the difference. For one, with puts, your maximum loss is the premium you paid, whereas with a short, your potential losses are unlimited. Another problem with shorting outright is that you can't always do it. Sometimes the stocks you want to short the most are hard to come by, and brokers can't find any shares to lend out.

Additionally, the SEC can take an emergency action to prevent investors from shorting certain companies, like it did last year with financial stocks such as Goldman Sachs NYSE: GS , Bank of America NYSE: BAC , and JPMorgan Chase NYSE: Finally, shorting a stock requires you to pay your lender dividends as they are paid, making shorting a high-yielding stock like Altria NYSE: MO a costly proposal.

When you buy a put, on the other hand, you're not on the hook to pay periodic dividends, though anticipated dividend payments do affect the price of the option to some degree.

Tread carefully, Fools Even if you think a stock is poised to plunge, remember that the stock market can be irrational in the short run, and that options have a finite life. What you consider a "sure thing" could take more time to materialize than the option affords, so be comfortable with the risks you're taking before you place the trade.

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Your maximum loss when you buy a put is the premium paid, but that's still cash that you'd otherwise have in your pocket, so allocate it as carefully as you would any other investment. In full appreciation of that risk, buying puts offers you a way to bet against stocks, indexes, and sectors without exposing your portfolio to potentially unlimited losses that you would incur by straight shorting.

Todd Wenning has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Alphabet C shares and Apple. The Motley Fool owns shares of Microsoft. The Motley Fool recommends Bank of America. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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