Bear Put Spread
Description
Buying a higher-strike put and selling a lower-strike put in the same expiry, trading away extra downside for a lower cost of entry.
Setup
- Buy one put at a higher strike.
- Sell one put at a lower strike, same expiry.
Context
Used when you expect a moderate decline and want a cheaper, defined-risk alternative to a bare long put.
Risk Profile
Maximum loss is the net debit paid. Maximum gain is the difference between strikes minus that debit, reached once the underlying is at or below the lower strike.
Pros
- Costs less than an outright long put.
- Defined, capped risk.
- Less exposed to a drop in implied volatility than a bare long put.
Cons
- Gain is capped even if the underlying falls hard.
- Still needs the underlying to clear the higher strike less net debit to profit.
Effect of Time
Time decay is muted compared to a single long put, since the short put's decay partially offsets the long put's decay.
Effect of Volatility
The spread's net vega is small; a change in implied volatility has a limited effect since both legs move together.
Look-Alike Strategies
Live Structure
| Position | Right | Ratio | Strike | Expiry | Premium | Fill Price | Est. Fee |
|---|---|---|---|---|---|---|---|
| Long | Put | 1 | $85000.0000 | 24 Sep 2026 | $696.1155 | $843.7764 | $25.3133 |
| Short | Put | 1 | $84000.0000 | 24 Sep 2026 | $113.9098 | $101.2532 | $14.2387 |
Estimated Cost to Assemble
An estimate of what entering this structure right now would really cost: filling every leg by crossing the spread (the ask when buying, the bid when selling) instead of at the mid-price, plus an estimated exchange fee. Real fees and fills can differ from this estimate.
Payoff & Greeks vs. Underlying Price
The Greeks curves are a Black-Scholes model using each leg's current implied volatility, holding time to expiry fixed -- not live exchange data at every price, which only exists at the current price (dashed line).
Payoff at Expiration
This structure's value and profit/loss at expiration, at a handful of specific prices: every leg's strike, every breakeven, the current spot, and the chart's own range.
| Underlying Price | Value at Expiration | Profit / Loss | Return on Cost |
|---|---|---|---|
| $83000.0000 | $1000.0000 | $417.7943 | +71.8% |
| $84000.0000 | $1000.0000 | $417.7943 | +71.8% |
| $84377.6400 current | $622.3600 | $40.1543 | +6.9% |
| $84417.7943 breakeven | $582.2057 | $0.0000 | +0.0% |
| $85000.0000 | $0.0000 | -$582.2057 | -100.0% |
| $86000.0000 | $0.0000 | -$582.2057 | -100.0% |