In options trading, a bear spread is a bearish, vertical spread options strategy that can be used when the options trader is moderately bearish on the underlying security.Because of put-call parity, a bear spread can be constructed using either put options or call options. If constructed using calls, it is a bear call spread. If constructed using puts, it is a bear put spread.
It is entered by buying call options of a certain strike price and selling the same number of call options of lower strike price (in the money) on the same underlying security with the same expiration month. Important legal information about the email you will be sending. By using this service, you agree to input your real email address and only send it to people you know. It is a violation of law in some jurisdictions to falsely identify yourself in an email.
DescriptionA bear put spread is a type of vertical spread. It consists of buying one put in hopes of profiting from a decline in the underlying stock, and writing another put with the same expiration, but with a lower strike price, as a way to offset some of the cost. Because of the way the strike prices are selected, this strategy requires a net cash outlay (net debit) at the outset.Assuming the stock moves down toward the lower strike price, the bear put spread wThe 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.
Bear Put Spread ConstructionBuy 1 ITM PutSell 1 OTM PutBy shorting the out-of-the-money put, the options trader reduces the cost of establishing the bearish position butforgoes the chance of making a large profit in the event that the underlying assetprice plummets. The bear put spread options strategy is also know as the bear put debit spread as a debit is takenupon entering the trade. Nilesh Jain 21 Mar 2017A Bear Put Spread strategy involves two put options with different strike prices but the same expiration date.
Bear Put Spread is also considered as a cheaper alternative to bear put option spread strategy 7s put because it involves selling of the put option to offset some of the cost of buying puts. This strategy is basically used to reduce the upfront costs of premium, so that less investment of premium is required and it can also reduce the affect of time decay. Even beginners can apply this strategy when they expect security to fall moderately in near the term.
7s bear spread option put strategy