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Bear Put Spread

The Bear Put Spread is a simple option strategy and is structured by a long put option and a short put option with lower strike and same expiry. The risk of the buyer of the Bear Put Spread is limited to the difference between the two option premiums. The potential for profit is limited to the difference between the strike prices less the premium paid and transaction costs. The maximum profit could be received only at the expiry.

The Bear Put Spread strategy is most suitable in the following cases:

  • When you consider that the price of the underlying asset will fall, but not below certain price level;
  • When you want to have a position with absolute control of the risk;
  • When we want to take bearish position for lower costs.