⚠️ Options involve significant risk and are not suitable for all investors. Before trading options, read the OCC Characteristics and Risks of Standardized Options. Educational only; not investment advice. Examples ignore commissions, taxes, and early assignment.

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Bear Put Spread

Buy a higher-strike put and sell a lower-strike put. A cheaper, capped bearish trade.

New to this? A spread combines two options. Here you buy a put and sell a lower-strike put, which lowers the cost but caps the profit. Unfamiliar word? See the options glossary.

Payoff at expiration

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When traders use it

Moderately bearish with a target near the short strike.

Formulas (per share; ×100 per contract)

Max profit	(K1 − K2) − net debit
Max loss	Net debit (P1 − P2)
Breakeven	K1 − net debit

Key risks

Capped profit; full debit at risk; early assignment on the short put.

How it works

You buy a put at a higher strike and sell a put at a lower strike, same expiration. Net debit = maximum loss; maximum value is the strike width.

Worked example HYPOTHETICAL

Hypothetical example only — not real prices or a recommendation. Stock at $100. Buy the $100 put for $4.00, sell the $90 put for $1.50. Net debit $2.50 ($250).

Stock price at expiration	P/L (1 contract, excl. fees)
$80	+$750
$90	+$750
$95	+$250
$97.5	$0
$100	−$250
$110	−$250

Market outlook: when to use it

Use when: Moderately bearish with a downside target near the short strike.

Avoid when: Expecting a crash far below the short strike, or a slow drift.

The Greeks, in plain words

Delta	Negative (gains when stock falls), smaller than a long put.
Theta	Mixed: hurts above the long strike, helps once near/below the short strike.
Vega	Small.
Gamma	Small.

Choosing strikes and expiration

Long put ATM or slightly ITM, short put at your target. 30–60 days.

Managing the trade

Take profit at 50–80% of max. Close before expiration if the short put is ITM to avoid assignment of shares. Short put can be assigned early when deep ITM.

Common mistakes

Holding to expiration between strikes.
Paying near the full width.

FAQ

Max profit?
$10 − $2.50 = $7.50 ($750).

Breakeven?
Long strike − debit = $97.50.

Explained simply

When would someone use this?

When you expect a moderate drop and want a cheaper, defined-risk bearish trade.

The setup, in plain words

Buy a put at a higher strike and sell a put at a lower strike, same expiration.

Max profit, max loss and breakeven

Max profit: (Higher strike − lower strike − net debit) × 100.
Max loss: The net debit paid.
Breakeven: Higher strike − net debit.

A simple numeric example (hypothetical)

Stock at $100. Buy the $100 put for $3 and sell the $90 put for $1: net cost $2 ($200). Stock at $90 or lower: profit $800. Stock at $98: breakeven. Stock at $100 or higher: loss $200.

The main risks, in plain words