Options Strategy Guide
Bear Put Spread
Bet on a stock going down — at a reduced cost.
Beginner
Bearish
Defined risk, defined reward — cheaper than buying a put outright
The Simple Version
Plain English — no jargon
You think a stock is going down. Buying a put outright is expensive, so you buy a put at $100 and sell a cheaper put at $90. The one you sell partially funds the one you bought. You profit if the stock falls below $100, capped at $90. Lower cost, defined risk.
How It Works — Step by Step
- 1 Buy a put option at a higher strike (your bearish bet)
- 2 Sell a put option at a lower strike (reduces your cost)
- 3 Net debit paid = your maximum loss
- 4 Maximum profit = difference between strikes minus net debit
- 5 Profit if stock falls below the lower breakeven at expiration
Real Example
TSLA
Illustrative example — not a recommendation
Stock Price
$250.0
Strike Price
$240.0
Premium Collected
$4.0/share
Days to Expiration
30d
Max Profit
$600
Breakeven
$236.0
Annualized Return
150.0%
When to Use It — and When Not To
✓ Use when
- You are bearish but want to reduce premium cost vs. a naked long put
- You have a specific downside target in mind
- IV is high — selling the lower put offsets the expensive upper put
✗ Avoid when
- You expect a dramatic crash — the spread caps your profit
- You are bullish or neutral on the stock
- IV is very low — little benefit to the spread structure
Greeks & Mechanics (for the experienced trader)
Delta
Negative — profits from downward stock movement.
Theta
Slightly negative — time works somewhat against you.
Vega
Slightly positive — benefits mildly from rising IV.
Gamma
Positive but capped by the short put below.
Key Risks
- Max loss = net debit paid — can lose full premium if stock rises
- Profit is capped at the lower strike
- Assignment risk on the short put if stock falls through it
Related Strategies
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