BEAR PUT SPREAD | bear strategy

Example: Sell 1 put; buy 1 put at higher strike
Market Outlook: Bearish
Risk: Limited
Reward: Limited
Increase in Volatility: Helps or hurts depending on strikes chosen
Time Erosion: Helps or hurts depending on strikes chosen
Break-Even Point (BEP): Long put strike minus net premium paid

The bear put spread option trading strategy is employed when the options trader thinks that the price of the underlying asset will go down moderately in the near term.

Bear put spreads can be implemented by buying a higher striking in-the-money put option and selling a lower striking out-of-the-money put option of the same underlying security with the same expiration date.

By shorting the out-of-the-money put, the options trader reduces the cost of establishing the bearish position but forgoes the chance of making a large profit in the event that the underlying asset price plummets. The bear put spread options strategy is also know as the bear put debit spread as a debit is taken upon entering the trade.

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