Snapshot
Legs
Buy 1 Higher-Strike Put + Sell 1 Lower-Strike Put
Outlook
Moderately Bearish
Max profit
Difference between strike prices minus net debit paid
Max Loss
Net debit paid
A bear put option strategy, or bear put spread, is created by buying a put option with a higher strike price and selling a put option with a lower strike price on the same underlying asset and expiration date. You pay a net debit upfront to open the position. Investors use this strategy when they expect a moderate drop in the price of the stock.
Your maximum profit is capped at the difference between the two strike prices minus the net debit paid, achieved if the stock closes at or below the lower strike price at expiration. The maximum loss is limited to the initial net debit paid if the stock remains above the higher strike price, making it a controlled-risk bearish trade.
Example
Stock
$100
Trade
- Buy $100 Put for $4.00
- Sell $95 Put for $1.50
→ $2.50 debit ($250)
Breakeven
$97.50
Outcomes
- Stock ≤ $95: +$250 Max Profit
- Stock at $97.50: $0 Breakeven
- Stock ≥ $100: -$250 Max Loss