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OPTIONS STRATEGIES·BEARISH·2 LEGS

Bear put spread

Buy a higher-strike put, sell a lower-strike put. Cheaper than buying a put outright; max profit reached at the lower strike.

INPUTS
Underlying price
$
Centers the payoff chart and computes P&L at this price.
LEGS
Long upper put
Type
Side
Strike
$
Qty
Premium
$
Short lower put
Type
Side
Strike
$
Qty
Premium
$
RESULT
BE $98.50spot $100.00
$60.002 strikes$140.00
P&L at current spot (expiry)
−$150
Net debit−$150
Max profit+$350
Max loss−$150
Breakeven$98.50
Risk / reward2.33 : 1
RISK PROFILE
Max profit
Strike width × 100 − net debit
Max loss
Net debit paid
Breakeven
Upper strike − (debit ÷ 100)
HOW IT WORKS

How a bear put spread works

A bear put spread buys a put and sells a lower-strike put in the same expiry, paying a net debit. The short put finances part of the long one, so the position costs less than the put alone — and in exchange, the profit stops at the lower strike.

This is the bearish counterpart to the bull call spread and solves the same problem. A long put pays for a lot of extrinsic value that decays against you; selling a lower strike hands part of that cost to someone else. You give up the tail below your short strike, which is usually a move you were not forecasting anyway.

Both maximum profit and maximum loss are set at entry. Max loss is the debit. Max profit is the strike width minus the debit. Breakeven is the long put strike minus the debit, which sits above where the bare put would have broken even.

WORKED EXAMPLE

A worked example

XYZ trades at $100 and you expect a decline toward $90. You buy the $100 put for $4.00 per share and sell the $90 put for $1.50, both expiring in 45 days.

Net debit
$4.00 − $1.50 = $2.50 × 100 = $250 (max loss)
Breakeven
$100 long strike − $2.50 = $97.50
Max profit
($10 width − $2.50) × 100 = $750, at or below $90
At expiry, XYZ ≤ $90
+$750, capped — further decline is not yours
At expiry, XYZ ≥ $100
Both expire worthless, −$250

A 3:1 payoff with breakeven at $97.50 instead of the $96.00 a bare $100 put would have needed. The stock falling to $70 pays exactly the same as falling to $90.

FIT

When a bear put spread fits — and when it doesn't

Consider it when
  • You expect a decline to a level you can name rather than a collapse.
  • Put premiums are elevated and a naked long put feels expensive — the short leg recovers some of that.
  • You want both sides of the trade known before entry.
Think twice when
  • You are positioning for a crash or a gap-down event. Capping the downside defeats the purpose.
  • The debit approaches the strike width, leaving little reward for the risk.
  • Liquidity is thin — two legs mean four bid-ask crossings over the life of the trade.
FAQ

Common questions

What is the maximum profit on a bear put spread?

(Strike width − net debit) × 100. A $10-wide spread opened for $2.50 pays a maximum of $750 per contract, reached at or below the short strike at expiry.

How does it compare to just buying a put?

The spread costs less, breaks even sooner, and decays more slowly. The long put keeps the full downside. The spread suits a target price; the put suits an open-ended decline.

Is a bear put spread a debit or credit trade?

A debit. You pay to open it, and that debit is your maximum loss. The bear call spread is the credit-based way to express the same bearish view.

When does it reach maximum profit?

At or below the short strike at expiry. Before expiry the position will be worth less than its maximum even deep in the money, because the short leg retains some extrinsic value.

RELATED STRATEGIES
Long put
Bearish · Limited risk, capped downside profit.
Bull put spread
Bullish · Credit spread, defined risk.
Iron condor
Neutral · Defined-risk credit, profits when stock stays in range.
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