Bear Put Spread

Low cost, decent profits if the price falls to a certain level

The Bear Put Spread is a strategy that helps you to make a bet on a local price drop while paying less than for an at-the-money put option.

The break-even price will also be lower than in the ATM options as the price should drop just a little lower for the Bear Put Spread to be in-the-money.

This is achieved by simultaneously selling an out-of-the-money put option with a lower strike price when you buy an at-the-money put option, and this is the essence of the Bear Put Spread.

The Bear Put Spread has a limited low cost and capped potential profit.

Buying one Bear Put Spread is equal to buying ATM put while at the same selling a OTM put with a lower strike price.