OptionsAcademy

A bear put spread is a vertical spread where you sell a put at a higher strike and buy a put at a lower strike, both expiring the same month.

How It Works

Apple at $150:

• Sell $150 put for $4
• Buy $140 put for $1
• Collect $3 net credit ($300 per contract)

Maximum profit: $3 per share ($300) if stock falls below $150. Maximum loss: $7 per share ($700) if stock falls below $140. Breakeven: $147 ($150 - $3 credit).

Why Use It

• Collect premium upfront
• Limited risk (defined at entry)
• Works when stock falls
• Better than naked short puts (risk is capped)

Risk Profile

Maximum Profit: Credit collected

Maximum Loss: Width of strikes minus credit

Profitable Zone: Below the sold strike at expiration

When to Use

Use when bearish. The further down you expect the stock to go, the more profitable the spread if it gets there.

Management

• Close at 50% max profit
• Roll down if stock rallies
• Let expire if OTM

Related: Bull Put Spread, Short Put, Vertical Spread