Learn To Trade Forex • Best Forex Trading Course • AsiaForexMentor

  • Best Brokers
    • Choosing Brokers
    • Comparing Brokers
  • Best by Country
    • flags Best Forex Brokers in Taiwan
    • flagsBest Forex Brokers in Singapore
    • flagsBest Forex Brokers in South Africa
    • flagsBest Forex Brokers in Japan
    • flagsBest Forex Brokers in Philippines
    • flagsBest Forex Brokers in Malaysia
    • flagsBest Forex Brokers in Vietnam
    • flagsBest Forex Brokers in India
    • flagsBest Forex Brokers in Thailand
    • flagsBest Forex Brokers in South Korea
    • flagsBest Forex Brokers in China
    • flags Best Forex Brokers in Indonesia
    • flagsBest Forex Brokers in UAE
    • flagsBest Forex Brokers in Dubai
    • flagsBest Forex Brokers in Italy
    • flagsBest Forex Brokers in Spain
    • flagsBest Forex Brokers in UK
    • flagsBest Forex Brokers in US
    • flagsBest Forex Brokers in Australia
    • flagsBest Forex Brokers in Switzerland
  • Brokers Review
  • Ranking List
    • Popular Brokers
      • Pamm Forex Brokers
      • MT4 Forex Brokers
      • MT5 Forex Brokers
      • cTrader Forex Brokers
      • Commodity Brokers
    • By Regulation
      • FCA Regulated Forex Brokers
      • NFA Regulated Forex Brokers
      • NYSE Regulated Forex Brokers
      • ECN Regulated Forex Brokers
    • By Instruments
      • Gold Trading Brokers
      • Oil Trading Brokers
    • By Brokers Types
      • Stp Brokers
      • Market Makers
    • By Prop Trading Firm
    • By Trading Platforms
    • Top 10 Best Forex Brokers
  • Brokers
    • Choosing Brokers Categories
    • Compare Forex Brokers
  • Ranking List
    • Best Forex Brokers
    • Brokers by Country
      • US Forex Brokers
      • UK Forex Brokers
      • Australian Forex Brokers
      • Swiss Forex Brokers
    • Popular Brokers
      • Pamm Forex Brokers
      • MT4 Forex Brokers
      • Commodity Brokers
    • By Regulation
      • ECN Regulated Forex Brokers
      • NYSE Regulated Forex Brokers
      • NFA Regulated Forex Brokers
      • FCA Regulated Forex Brokers
    • By Instruments
      • Gold Trading Brokers
      • Oil Trading Brokers
      • Top 10 Best Forex Brokers
    • By Brokers Type
      • Stp Brokers
      • Market Makers
    • By Prop Trading Firm
    • By Trading Platform
  • Academy
    • Forex Guide
    • Trading Videos
    • Trading Strategies
    • AFM One Core Program
    • Trade Rescue Operation
    • Corporate Training & Advisory
  • Promotions
  • Newsletter
  • Best Brokers
    • Choosing Brokers
    • Comparing Brokers
  • Best by Country
    • flags Best Forex Brokers in Taiwan
    • flagsBest Forex Brokers in Singapore
    • flagsBest Forex Brokers in South Africa
    • flagsBest Forex Brokers in Japan
    • flagsBest Forex Brokers in Philippines
    • flagsBest Forex Brokers in Malaysia
    • flagsBest Forex Brokers in Vietnam
    • flagsBest Forex Brokers in India
    • flagsBest Forex Brokers in Thailand
    • flagsBest Forex Brokers in South Korea
    • flagsBest Forex Brokers in China
    • flags Best Forex Brokers in Indonesia
    • flagsBest Forex Brokers in UAE
    • flagsBest Forex Brokers in Dubai
    • flagsBest Forex Brokers in Italy
    • flagsBest Forex Brokers in Spain
    • flagsBest Forex Brokers in UK
    • flagsBest Forex Brokers in US
    • flagsBest Forex Brokers in Australia
    • flagsBest Forex Brokers in Switzerland
  • Brokers Review
  • Ranking List
    • Popular Brokers
      • Pamm Forex Brokers
      • MT4 Forex Brokers
      • MT5 Forex Brokers
      • cTrader Forex Brokers
      • Commodity Brokers
    • By Regulation
      • FCA Regulated Forex Brokers
      • NFA Regulated Forex Brokers
      • NYSE Regulated Forex Brokers
      • ECN Regulated Forex Brokers
    • By Instruments
      • Gold Trading Brokers
      • Oil Trading Brokers
    • By Brokers Types
      • Stp Brokers
      • Market Makers
    • By Prop Trading Firm
    • By Trading Platforms
    • Top 10 Best Forex Brokers
  • Brokers
    • Choosing Brokers Categories
    • Compare Forex Brokers
  • Ranking List
    • Best Forex Brokers
    • Brokers by Country
      • US Forex Brokers
      • UK Forex Brokers
      • Australian Forex Brokers
      • Swiss Forex Brokers
    • Popular Brokers
      • Pamm Forex Brokers
      • MT4 Forex Brokers
      • Commodity Brokers
    • By Regulation
      • ECN Regulated Forex Brokers
      • NYSE Regulated Forex Brokers
      • NFA Regulated Forex Brokers
      • FCA Regulated Forex Brokers
    • By Instruments
      • Gold Trading Brokers
      • Oil Trading Brokers
      • Top 10 Best Forex Brokers
    • By Brokers Type
      • Stp Brokers
      • Market Makers
    • By Prop Trading Firm
    • By Trading Platform
  • Academy
    • Forex Guide
    • Trading Videos
    • Trading Strategies
    • AFM One Core Program
    • Trade Rescue Operation
    • Corporate Training & Advisory
  • Promotions
  • Newsletter
AFM Proprietary Program
  • Best Brokers
    • Choosing Brokers
    • Comparing Brokers
    • Best CFD Brokers
    • Best ECN Brokers
    • Best MT5 Brokers
    • Best MT4 Brokers
    • Best cTrader Brokers
    • Best Spread Betting Brokers
    • Best PayPal Forex Brokers
    • High Leverage Forex Brokers
    • Best Zero Spread Brokers
    • Lowest Spread Forex Broker
    • Best Raw Spreads Brokers
    • Best TradingView Brokers
    • Best Forex Broker for Beginners
    • Best Forex Brokers for Scalping
    • Best Forex Options Brokers
    • PAMM Account Brokers
    • Best Bitcoin Forex Brokers
    • Best Cent Account Forex Brokers
    • Cheapest Forex Brokers
    • Best Commodities Brokers
  • Best by Country
    • flags Best Forex Brokers in Taiwan
    • flagsBest Forex Brokers in Singapore
    • flagsBest Forex Brokers in South Africa
    • flagsBest Forex Brokers in Japan
    • flagsBest Forex Brokers in Philippines
    • flagsBest Forex Brokers in Malaysia
    • flagsBest Forex Brokers in Vietnam
    • flagsBest Forex Brokers in India
    • flagsBest Forex Brokers in Thailand
    • flagsBest Forex Brokers in South Korea
    • flagsBest Forex Brokers in China
    • flags Best Forex Brokers in Indonesia
    • flagsBest Forex Brokers in UAE
    • flagsBest Forex Brokers in Dubai
    • flagsBest Forex Brokers in Italy
    • flagsBest Forex Brokers in Spain
    • flagsBest Forex Brokers in UK
    • flagsBest Forex Brokers in US
    • flagsBest Forex Brokers in Australia
    • flagsBest Forex Brokers in Switzerland
  • Brokers Review

    Forex Brokers

    • AvaTrade
    • Plus500 標誌 Plus500
    • FP Markets
    • TMGM
    • EXNESS
    • XM
    • JustMarkets
    • HTFX
    • Doo Prime
    • Markets4you

    Stock Brokers

    • XM
    • Interactive Brokers
    • Orbex
    • RoboForex

    Crypto Exchanges

    • Binance
    • Coinbase
    • Gemini Exchange
    • Kraken

    Prop Firms

    • iFunds
    • IC Funded
    • The 5ers Logo (2)-svg The 5%ers
    • TopStep

    Binary Brokers

    • IQ Option
    • Pocket Option
    • RaceOption
    • IQCent
  • Ranking List
    • Popular Brokers
      • Pamm Forex Brokers
      • MT4 Forex Brokers
      • MT5 Forex Brokers
      • cTrader Forex Brokers
      • Commodity Brokers
    • By Regulation
      • FCA Regulated Forex Brokers
      • NFA Regulated Forex Brokers
      • NYSE Regulated Forex Brokers
      • ECN Regulated Forex Brokers
    • By Instruments
      • Gold Trading Brokers
      • Oil Trading Brokers
    • By Brokers Types
      • Stp Brokers
      • Market Makers
    • By Prop Trading Firm
    • By Trading Platforms
    • Top 10 Best Forex Brokers
  • Brokers
    • Choosing Brokers Categories
    • Compare Forex Brokers
  • Ranking List
    • Best Forex Brokers
    • Brokers by Country
      • US Forex Brokers
      • UK Forex Brokers
      • Australian Forex Brokers
      • Swiss Forex Brokers
    • Popular Brokers
      • Pamm Forex Brokers
      • MT4 Forex Brokers
      • Commodity Brokers
    • By Regulation
      • ECN Regulated Forex Brokers
      • NYSE Regulated Forex Brokers
      • NFA Regulated Forex Brokers
      • FCA Regulated Forex Brokers
    • By Instruments
      • Gold Trading Brokers
      • Oil Trading Brokers
      • Top 10 Best Forex Brokers
    • By Brokers Type
      • Stp Brokers
      • Market Makers
    • By Prop Trading Firm
    • By Trading Platform
  • Academy
    • Forex Guide
    • Trading Videos
    • Trading Strategies
    • AFM One Core Program
    • Trade Rescue Operation
    • Corporate Training & Advisory
  • Promotions
  • Newsletter
AFM Proprietary Program

Bear Put Spread – The Best Options Strategy To Profit From Bearish Markets

Written by

Ezekiel Chew

Updated on

January 29, 2024

i
Its a default text
January 29, 2024 9:35 am No Comments

bear put

The Bear Put Spread options strategy entails selling one Put Option since synchronously purchasing another. In this case, as opposed to the Bear Call Spread, you pay the more significant premium and obtain the lesser premium.

There is a deficit in premiums as a result. Your reward is restricted to the variation in Put Option strike prices less net premiums, while your risk is limited to the luxurious difference.

In financial trading, this strategy helps traders anticipate a moderate decline in the underlying asset price. This strategy is also referred to as the bear put debit spread because a net debit is made when entering the trade.

Also Read: What is the Bear Call Spread Strategy and How to Apply It?

Contents

  • What Is Bear put spread options strategy?
  • How Does It work?
  • Who Can Use Bear Put Spread?
  • How To Trade With Bear Put Spread Options Strategy?
  • Advantages And Disadvantages Of Bear Put Spread Options Strategy
  • Bottom Line
  • FAQs

What Is Bear put spread options strategy?

To use this strategy, the investor must purchase a put option in the money (higher) and sell a put option that is out of the money (lower) on the same company and expiration date. This strategy results in a net loss for the investor.

bear put
Photo Credit: pexels.com

The overall result of the strategy is to increase the breakeven point and decrease the cost of buying a Put (Long Put). The strategy requires a bearish viewpoint because the investment company will only profit if the stock price/index declines. Low risk and little profit are associated with this approach.

Back to Top

How Does It work?

The two puts in a bear put spread different strike prices: one long put has a higher strike price, and the other short put has a lower strike price. The underlying stock and expiration date of both puts are the same.

A bear put spread sets up for a net debit (or net cost) and gains as the price of the underlying stock drops. Maximum profit is restricted if the stock price rises above the long puts' strike price, and potential losses are constrained if it falls below the short put's lower strike price (higher strike).

Back to Top

Who Can Use Bear Put Spread?

Compared to a long put option, a bear put debit spread lowers the maximum loss and makes it more attractive for trading. The rules also limit the maximum gain potential.

bear put 2
Photo Credit: pexels.com

A professional trader must have extensive technical skills to know the same strike price of a put option to maximize profits. This strategy is aimed mainly at intermediate & experienced traders.

When Should You Use A Bear Put Spread?

As its name suggests, a bear put spread is used when an investor anticipates that the asset's price will be bearish to slightly bearish.

The ideal situation is when a trader anticipates that the asset's price will decline in the near term but that it won't fall below a specific key support level, which can be determined by strong moving average support or Fibonacci levels.

You should select an expiration date or date-to-expiration (DTE) that is 30 days later than the anticipated length of your participation in the trade (due to Theta decay). It's best to choose a DTE close to 15 days + 30 days = 45 days, for instance, if you believe the price of Bitcoin will fall within 15 days or if you plan to be in the trade for 15 days.

Back to Top

How To Trade With Bear Put Spread Options Strategy?

A bear put spread setup develops from buying put options and simultaneously selling the exact number of puts on the same investment and expiration date but with a lower strike price.

bear put 3
Photo Credit: pexels.com

The difference in the two strike prices, less the net cost of the options, is equal to the maximum profit possible using this strategy.

Determine And Target Solid Strike Prices

Buying put options and selling the same amount of puts on the same investment with the same expiration date and a lower strike price results in a bear put spread. The difference in the two strike prices, less the net cost of the options, is equal to the maximum profit possible using this strategy.

An individual who owns a put option has the option, but not the obligation, to sell a predetermined quantity of the respective security at predetermined strike prices at the option's expiration or earlier.

Consider Options In Lower Strike Price

The bear put spread options strategy is an additional variety of vertical spread. This strategy involves the investor purchasing a predetermined number of put options at a predetermined strike price while concurrently selling the exact number of put options at lower strike prices. Both options are bought for the same underlying security and expiration date.

When a trader is bearish on the underlying asset and anticipates a decline in the asset's price, they will use this strategy. The strategy provides limited gains and losses. The stock price must decline for this strategy to be carried out successfully.

bear put 4
Photo Credit: pexels.com

While your upside is constrained when using a bear put spread, your premium outlay is decreased. Selling lower strike puts against expensive outright puts is one way to reduce the high premium.

Assess The Bear Put Spread Impacts On Stock Price Changes

When the stock price drops, the price of a bear put debit spread increases, and when the price rises, the debit spread decreases. This denotes a “net negative delta” for the position.

The change in option price is typically lower than dollar-for-dollar with the change in stock prices, according to Delta's estimate of how much an options price will differ as the stock price changes.

A bear put spread's net delta changes are very little as the stock price fluctuates, and the time until expiration stays the same because it comprises one long put as well as one short put option. This is referred to as a “near-zero gamma” in the language of the options. Gamma calculates how much a position's delta will alter as the stock price changes.

Also Read: Bear Trap – The Best Technical Strategy to Profit from Short Squeezes

Back to Top

Advantages And Disadvantages Of Bear Put Spread Options Strategy

A bear put spread's primary benefit is a reduction in the net risk of the trade. The cost of buying the put option with a higher strike price is partially offset by selling the put option within the lower strike price.

As a result, the net capital expenditure is less than purchasing a single put outright. Furthermore, since the maximum risk is restricted to the net cost of the bear put debit spread, it entails significantly lower risk compared to shorting the stock or security. The risk associated with shorting a stock is theoretically limitless if the price rises.

bear put 5
Photo Credit: pexels.com

A bear put debit spread might be the best option if the trader thinks the underlying stock price or security will decline by a specific amount between the trade date and the expiration date.

The trader forfeits the right to that maximum profit if the underlying stock or security drops by a bigger margin. Many traders find the trade-off between risk and potential reward to be appealing.

In the prescriptive, the bear put spread's profit is maximized if the underlying security closes at the lower strike price of $30 at expiration. There will be no further profit if it closes below $30.

A smaller profit will be if it closes between the two strike prices. Besides, the amount paid to buy the spread will be lost if it exceeds the higher strike price of $35.

Furthermore, like with any short position, option holders have no control over the deadline for fulfilling their obligation. Early assignment, or having to purchase or sell the specified quantity of the asset at the agreed-upon price, is a risk that is always present.

bear put 6
Photo Credit: pexels.com

If a merger, takeover, special dividend, or another event that affects the option's underlying stock occurs, the early exercise of the option is frequently the result.

Pros

  • A lower risk than straightforward short-selling
  • Works well in markets that are slightly declining
  • Losses are limited to the total amount paid for the options.

Cons

  • Early assignment risk
  • Risky if the asset admires markedly
  • Profits to the difference between strike prices

Back to Top

Bottom Line

The bear put spread strategy might be your best bet if your goal as a trader is to make money when markets decline by a certain amount. It provides a higher chance of profit than purchasing put options and lowers your potential loss if you choose the wrong course of action. Being less expensive to execute than an outright short position, the bear put spread is a fantastic alternative.

Back to Top

FAQs

What Is a Bear Put Spread Example?

Bitcoin is trading for about $2000 per day. If a trader believes bitcoin will fall in price within 20 days, then a trader can create a bear Put debit spread by buying put option contracts that expire in around 50 days. The trader believes bitcoins should never fall below $16,000. The bitcoin 500-week trend line is set to trigger in the worst-case scenario.

Is a Put Spread Bullish or Bearish?

A put spread is an options strategy used by bearish traders to maximize profits while reducing losses. A bear put spread trading strategy entails buying and selling puts on the exact same underlying asset at various strike prices within the same expiration date.

How Does a Bear Put Spread Make Money?

A bear put spread is when one puts buys another put and sells one put at lower strike costs, offsetting a part of upfront costs. Spread usually profiteers if stocks drop in value. Nevertheless, a stock can rally unexpectedly, and there may be risks.

Back to Top

 

« Previous
Next »
Leave a Reply

Click here to cancel reply.

GET THE PROPRIETARY ONE CORE PROGRAM
The same system I use to make 6 figures a trade with

5 PART SYSTEM TO MAKE REALLY BIG MONEY IN TRADING

FREE TRAINING

We have generated over millions of dollars via trading with the 5 part system outlined in this free training. Download it now before this page comes down or when I decide to stop mentoring.
 

Services

  • AFM One Core Program
  • Corporate Forex Training
  • Trade Rescue
  • Speak At Your Event
  • AFM One Core Program
  • Corporate Forex Training
  • Trade Rescue
  • Speak At Your Event

Resources

  • Forex Trading Strategies
  • Forex Blog
  • Forex Vlog
  • Download Trading Platform
  • Forex Position Size Calculator
  • Forex Brokers Review & Rating
  • Forex Trading Strategies
  • Forex Blog
  • Forex Vlog
  • Download Trading Platform
  • Forex Position Size Calculator
  • Forex Brokers Review & Rating

Company

  • Who is Asia Forex Mentor
  • Asia Forex Mentor Reviews
  • Contact Us
  • Affiliate Program
  • Advertise with us
  • Best Crypto Broker
  • Who is Asia Forex Mentor
  • Asia Forex Mentor Reviews
  • Contact Us
  • Affiliate Program
  • Advertise with us
  • Best Crypto Broker

Address

6 Raffles Boulevard, #03-308,
Singapore 039594

Whatsapp Text: +65 8786 8319

Disclaimer: Any Advice or information on this website is General Advice Only – It does not take into account your personal circumstances, please do not trade or invest based solely on this information. By Viewing any material or using the information within this site you agree that this is general education material and you will not hold any person or entity responsible for loss or damages resulting from the content or general advice provided here by ECG Pte Ltd, it’s employees, directors or fellow members. Futures, options, and spot currency trading have large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don’t trade with money you can’t afford to lose. This website is neither a solicitation nor an offer to Buy/Sell futures, spot forex, cfd’s, options or other financial products. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed in any material on this website. The past performance of any trading system or methodology is not necessarily indicative of future results.
High Risk Warning: Forex, Futures, Stocks, Indexes, Commodities, Crypto and Options trading has large potential rewards, but also large potential risks. The high degree of leverage can work against you as well as for you. You must be aware of the risks of investing in forex, futures, and options and be willing to accept them in order to trade in these markets. Forex trading involves substantial risk of loss and is not suitable for all investors. Please do not trade with borrowed money or money you cannot afford to lose. Any opinions, news, research, analysis, prices, or other information contained on this website is provided as general market commentary and does not constitute investment advice. We will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from the use of or reliance on such information. Please remember that the past performance of any trading system or methodology is not necessarily indicative of future results.

AFM

#1 FOREX MENTOR IN ASIA

©2025 ASIA FOREX MENTOR. All Rights Reserved.

| Disclaimer – Terms of Use | Privacy Policy | Cookie Policy | Privacy Policy – Europe GDPR

English | Français | Deutsch

Facebook-f Youtube Instagram Tiktok Linkedin
Scroll to top

I consent to receiving emails and/or text message reminders for this event.

REGISTER FOR THE MASTERCLASS!