Bearish - Bear Put Spread

Function: Medium-Risk Speculation
Outlook: Bearish

Establishing a Bear Call Spread involves buying a put at a higher strike price and selling a put with the same expiration date, but with a lower strike price than the put you bought.  Compared to most option spreads, the bear put spread is a low risk, low reward strategy.  You make a profit if the underlying stock goes below the price of the put option that you sold.

The profit for a bear put spread is maximized at the difference between the price of the put option you sold less the price you paid for the put option you purchased.


Payoff Graph for a Bear Put Spread:

Bear Put Spread