Bear Put Spread: A Defined-Risk Bearish Trade
Last lesson you bet a stock would climb. Now you flip it. The bear put spread is the exact mirror image, built from two puts, for when you think a stock is heading down.
- How a bear put spread is built from two puts
- Your exact max profit, max loss, and breakeven
- Why it is the perfect mirror of the bull call spread
- When to reach for it instead of a plain put
Last lesson, you were bullish. You bought a call and sold a higher one to bet a stock would climb. This lesson, you wake up with the opposite view. You think the stock is heading lower.
Good news: you already know how to do this. You just point everything the other way.
Instead of two calls, you use two puts. (A put is the right to sell a stock at a set price, so it gains value as the stock falls, the mirror of a call.) Instead of betting on a climb, you bet on a drop. Every other piece, the cheaper entry, the capped risk, the clean floor and ceiling, works exactly the same. This is the bear put spread, and it is the mirror image of the trade you just learned.
Building the Bear Put Spread on Apple
Apple is at $200 a share, and you think it slides over the next month, maybe down to $190.
A plain $200 put costs $5 a share, $500 for the contract. Same as before, that is more than you want to pay for a modest move. So you build a spread:
You buy the $200 put for $5 a share. That is your bearish bet, the right to sell at $200 even if Apple drops far below it.
You sell the $190 put for $1.30 a share. That cash lowers your cost, and in exchange you give up any gain below $190.
The two strikes are $10 apart again, so the width is $10. If those words feel familiar, that is the point. The bear put spread runs on the exact same rules you learned last lesson, just flipped downhill.
What You Can Win, What You Can Lose
Both ends are fixed the moment you enter, just like before. Only the direction that helps you has flipped.
Your max loss is the net debit: $370. If Apple sits at $200 or climbs above it, both puts expire worthless and you are out the $370 you paid. That is the floor, even if Apple climbs to $250.
Your max profit is the width minus the net debit: $630. If Apple closes at $190 or lower, your $200 put is worth the full $10 of width, and after the $3.70 you paid you keep $630. Apple could fall to $150 and you still make exactly $630, because everything below $190 belongs to the put you sold.
Your breakeven is the higher strike minus the net debit: $196.30. Apple has to fall below $200 by enough to cover the $3.70 you paid before you are in the green.
Drag the price and watch the green appear as Apple falls, the opposite direction from last lesson.
Look at that shape next to last lesson's. They are the same diagram held up to a mirror. The bull call spread climbs to its profit as the stock rises. The bear put spread climbs to its profit as the stock falls. Same floor of $370, same ceiling of $630, same $10 width. That is the one parallel worth burning into memory: a bear put spread is a bull call spread pointed downhill.
Why Not Just Buy a Put?
Same answer as last lesson, flipped. You are not paying for a crash you do not expect.
A plain $200 put costs $500 and needs Apple under $195 to break even. The spread costs $370 and breaks even at $196.30. It is cheaper, it risks less, and right at your $190 target it pays you more than the plain put. The only thing you give up is the deep drop below $190, which was never your bet.
I learned to respect the downside the hard way, back when my account was smaller than my grocery bill. Betting on a drop with a plain put felt cheap until the stock drifted sideways and the put quietly melted to nothing. A spread would have cost me less and given the trade more room to work. Lesson learned, and now it is yours for free.
When a Bear Put Spread Fits
- You expect a steady drop to a target, not a total collapse
- The plain put feels too expensive for the move you expect
- You want your worst case fixed before you enter
- You can name the price where you would happily take profit (sell that strike)
- You expect a fast, deep drop (the cap costs you)
- You have no idea how far it could fall
- You truly want open-ended downside payoff
- A bear put spread buys one put and sells a lower put with the same expiration.
- It profits when the stock falls, the mirror of the bull call spread.
- Your max loss is the net debit, $370, no matter how high the stock climbs.
- Your max profit is the width minus the net debit: $630.
- Your breakeven is the higher strike minus the net debit: $196.30.
Pop Quiz
Three quick questions to lock it in. Pick an answer and the explanation shows up right away.
A bear put spread makes its full profit when the stock does what?
Full profit comes when Apple closes at or below the lower strike, $190. Everything below that belongs to the put you sold, so your profit is capped at $630.
Apple jumps to $230 instead of falling. What do you lose?
Both puts expire worthless when Apple is above $200, so you lose only what you paid: the $370 net debit. The cap protects you no matter how high it goes.
What is the breakeven for this spread?
For a bearish spread, breakeven is the higher strike minus what you paid: $200 minus $3.70, which is $196.30. Below that, you are in the green down to your $630 cap.
Bottom Line
A bear put spread is the calm way to bet a stock drops. You buy a put, sell a lower one to cut the cost, and know your exact best and worst case before you start. If you understood last lesson, you already understand this one, because it is the same trade wearing a different jacket.
Next up: Bull Put Spread. So far you have paid to enter both spreads. Now everything changes. In the next lesson you sell a spread and get paid up front, and time decay starts working for you instead of against you.