Bear Put Spread Strategy
A bearish strategy using puts to profit from downside with reduced cost.
Spread width - net debit
Net debit paid
Higher strike - net debit
bearish
📖 What is the Bear Put Spread?
A bear put spread (put debit spread) involves buying a put at one strike and selling a put at a lower strike with the same expiration. This reduces the cost compared to a long put but caps the profit potential. It's ideal for moderately bearish outlooks when you want defined risk and reward.
🔧 How to Set Up
BUY PUT @ Higher strike (ATM or slightly OTM)
Buy to open a put at higher strike
SELL PUT @ Lower strike (OTM)
Sell to open a put at lower strike
💡 Example Trade
Underlying: META @ $500
Buy 1 META $500 put, Sell 1 META $480 put for $7 debit
$1,300 ($20 spread - $7 debit)
$700 (net debit)
$493 ($500 - $7)
📊 Greeks Profile
Net negative but reduced from long put alone.
Net negative.
Can be slightly negative early, improves near expiration.
Reduced exposure compared to long put.
❓ Frequently Asked Questions
Bear put spread vs long put - when to use each?
Use bear put spreads when moderately bearish and want lower cost. Use long puts when very bearish and want maximum profit potential from a large move.
Pros & Cons
- ✓Lower cost than buying a put outright
- ✓Defined risk and defined reward
- ✓Lower breakeven than long put
- ✓Works in range-bound bearish scenarios
- ✗Capped profit potential
- ✗Less profit than long put in a crash
- ✗Requires management of two legs
- ✗May not profit enough from small moves
Ideal Conditions
- →Moderately bearish outlook
- →Want to reduce cost of bearish bet
- →Have a downside target in mind
- →Willing to cap profit for lower cost
💡 Pro Tips
- Choose the lower strike at your downside target
- Use 30-45 DTE for balanced theta/gamma
- Consider closing at 50% profit
- Wider spreads = more profit potential but more risk