When the Market Won’t Pull Back: Lessons from the Bear Call Bleed

There’s a specific kind of frustration that only options traders know.

You followed your process. You timed your entries with discipline, IV rank, RSI extremes, breadth signals, delta exposure. You structured risk-defined positions with statistical edge. And yet, month after month, the market shrugs off every signal like it’s not even watching.

That’s been the reality recently. Over the past three expiration cycles, bear call spreads, especially as part of iron condor setups, have taken hits. Not due to recklessness or broken signals. Just due to a one-sided market that refuses to exhale.

This is sequence risk in action. This is the law of large numbers reminding us that edge doesn’t always show up on schedule. But knowing something intellectually and feeling it emotionally aren’t the same. Sometimes, even when you’ve been in the game for decades, the losses sting and of course, like clockwork, hedges are questioned.

Let’s unpack this. For traders feeling that same fatigue. For the sake of emotional resilience. And for the long-term clarity that often gets buried in short-term noise.

Why Hedge at All?

We hedge extreme overbought markets for a reason.

Because markets don’t go up forever. Because when they turn, they tend to turn fast. Because risk-adjusted returns matter more than raw returns. Because upside risk, when ignored, can erase months of disciplined gains in a matter of hours.

Bear call spreads, in this context, aren’t crash bets. They’re skeptical structures, smart risk, sized properly, meant to collect premium when the market appears extended.

Until they don’t work.

This Rally Has a Memory

Through mid-2025, the market has remained relentlessly strong. The S&P 500 is up five straight months. Tech has outpaced everything. Breadth is narrowing again. Volatility is historically low. And every dip is still being bought like it’s 2021.

In that kind of environment, bear call spreads struggle, even when built on sound logic.

And this isn’t unprecedented. History shows us this pattern has played out before. Let’s walk through a few.

🧭 1999: The Final Dot-Com Melt-Up

Between October 1999 and March 2000, the Nasdaq gained nearly 75%. Five months. No real pullbacks. Just euphoric buying. Any attempt to hedge with call spreads during that stretch was punished, until it wasn’t. When the turn came, it came fast and vicious. But most traders didn’t make it that far.

🧭 2013: The QE Tidal Wave

The market gained nearly 30% that year with barely a 5% correction. From January through July, it was a slow melt-up. IV remained crushed. Any bearish exposure was a performance drag. It was the era of “don’t fight the Fed,” and short volatility struggled.

🧭 2020–2021: Vaccine Optimism and FOMO

Following the November 2020 vaccine announcements, the S&P rocketed higher for nearly six straight months. Iron condors? Tough. Bear call spreads? Punished. RSI stayed elevated, but the market just didn’t care. It wasn’t until the second half of 2021 that volatility finally returned.

Now, in 2025, we may be looking at another chapter in this familiar story.

When Smart Trades Don’t Work

Here’s the truth: hedges don’t pay in euphoric markets.

Even when your edge is real, even when you’re building positions with an 80% probability of profit, the market can still roll over your structure. This is where good traders begin to second-guess good process. Because outcomes deviate from expectation…temporarily.

That’s where sequence risk steps in.

Sequence Risk and the Trader’s Curse

Sequence risk is the idea that even a strategy with a positive expected value can suffer strings of losses. It’s the math behind the emotional pain. Flip a coin with a 75/25 edge, and you’ll come out ahead in 1,000 tosses. But what if the first 10 go against you?

The distribution isn’t linear.

You can do everything right, and still lose, several times in a row.

Not because the strategy is flawed. But because the order of wins and losses doesn’t always cooperate.

And when that bad sequence lands during a stretch of market strength, it feels like your hedging edge is broken. But it isn’t.

The Law of Large Numbers (and Why You Can’t Forget It)

The antidote to sequence risk is time.

The law of large numbers is what gets you to the other side of a bad run. It says that your results will converge with expected probability over a sufficiently large number of trades. That means consistent mechanics, not emotional deviation.

This is where most traders blow up. Not because the trade was bad, but because they changed it midstream. They increased size. Chased losses. Or abandoned hedging entirely just before the turn.

That’s the real danger. Not the loss itself, but the overreaction to it.

Offsetting Pain with Long Delta

There’s one big saving grace for traders who balance their portfolios with smart exposure: long delta.

And lately, that’s where the wins have come from. While hedges on the bear call side have struggled, bullish structures, like Poor Man’s Covered Calls (PMCCs) and cash-secured puts, have done their job. Quietly compounding. Absorbing the market’s strength. Softening the blow from the hedges.

This isn’t an accident. It’s design.

The idea is simple: hedges may lose, but long delta gains help balance the account.

Over time, when the environment shifts, that relationship reverses. Hedges protect capital while long exposure gets trimmed. This is what a true portfolio looks like.

The Emotional Toll of Consistent Losses

Still, none of this is easy. Even small losses, when they stack up, can wear you down.

You start to wonder: “Is my edge gone?” You feel like you’re falling behind, even when the math says otherwise. You start to question signals, process, even your own ability.

That’s when emotional capital starts to erode.

And when that happens, even small decisions become harder. It’s not just your P&L that suffers, it’s your confidence. Your clarity. Your willingness to stay objective.

This is why trading is more psychological than most will admit.

Final Thoughts: Stay in the Game

There are no certainties in trading. But there are certainties in how edges play out over time.

Hedging won’t always work. Neither will bullish exposure. But together, with a disciplined process, you create a framework that adapts to whatever the market throws at you.

The real edge isn’t the strategy. It’s sticking to it when it feels like it’s failing.

Because in this game, pulling out of a drawdown doesn’t happen in one trade. It happens slowly, steadily, just like the losses came. One edge-based decision at a time.

And if you're managing multiple strategies, or even just balancing a few core positions, know this:

Long-term consistency is built on short-term discomfort. Not avoiding it. Embracing it.

Probabilities over predictions,

Andy Crowder

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