Bear Put Spread Options Strategy Guide

When it makes sense

• You expect a moderate decline to a support level rather than a collapse
• Implied volatility is elevated, making an outright put expensive
• You want a better breakeven than an outright long put
• You want a fixed maximum loss and a clear profit target

How it works

Buy one put at or near the money and sell one put at a lower strike, same expiration. The net premium paid is the debit and the maximum loss. At expiration: above the long strike both puts expire worthless and you lose the debit; at or below the short strike the spread is worth its full width, for a profit of width minus debit; between the strikes the spread is worth the long strike minus the stock price. Breakeven is the long strike minus the debit.

Risk and reward

Maximum loss: the debit paid. Maximum profit: (width minus debit) times 100, reached when the stock finishes at or below the short strike. Breakeven: long strike minus debit. Return on risk is max profit divided by the debit; buying the spread for a third of its width returns 200% at the cap. Versus a long put you give up the profit from a crash below the short strike, and gain a lower cost and a closer breakeven.

Greeks and volatility

Net delta is negative but smaller than the long put's alone. Theta is negative while the stock is above the midpoint of the strikes and positive once the stock is below it, since the short put then decays faster than the long one. Vega is small and flips sign the same way. Because implied volatility usually rises when stocks fall, the long put's vega helps early in a decline, and the short put's vega dampens that benefit once the spread is deep in the money.

Managing the trade

Take most of the maximum profit and close rather than waiting for the final few percent, which requires the stock to stay below the short strike through expiration. The short put can be assigned early if it is deep in the money with little time value; you would then be long 100 shares against your long put, still a capped position, and can exercise the long put to unwind. If the stock closes between the strikes at expiration, the long put is exercised automatically and you end up short shares, so close or roll near-the-money spreads on expiration day.

What to screen for

Screen on debit as a share of width, probability of finishing below breakeven, and return on risk. An overbought filter (RSI above 70, stock stretched above its moving averages) finds fade candidates; a breakdown filter finds momentum shorts. Exclude earnings unless you specifically want the event, and check that both strikes have open interest, since put skew can leave lower strikes thinly traded.

Frequently asked questions

What is the breakeven of a bear put spread?

The long strike minus the net debit. Buying the $205 put and selling the $195 put for $3.40 breaks even at $201.60 at expiration.

What is the maximum profit on a put debit spread?

The strike width minus the debit, times 100. A $10-wide spread bought for $3.40 can make at most $660 per spread, when the stock finishes at or below the short strike.

Bear put spread or long put?

The spread is cheaper, breaks even sooner, and decays more slowly, but its profit stops at the short strike. Buy the outright put for crash protection or a big move; buy the spread for a move to a level.

Bear put spread or bear call spread?

Both are bearish and defined-risk. The put debit spread needs the stock to fall through breakeven; the call credit spread profits if the stock simply fails to rally above the short call, so it has a higher probability and a smaller payout.

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