The bear put spread
The bear put spread is the bull call spread’s mirror image — a defined-risk bet that a stock will fall. You buy a put and sell a lower-strike put to cheapen it. Your downside profit is capped at the lower strike, and your loss is limited to the net premium paid.
How it is built
Two puts, same expiration: buy the higher strike, sell the lower. Stock at $100: buy the $100 put for $5, sell the $90 put for $2, net debit $3. If the stock falls to $90 or below, the spread reaches its full $10 width for a $7 profit. Your maximum loss is the $3 paid, which happens if the stock stays at or above $100. Breakeven is $97 — the upper strike minus what you paid.
| Outlook | Moderately bearish |
|---|---|
| Max profit | (Strike width − net debit) = $7/share at or below $90 |
| Max loss | Net debit = $3/share, at or above $100 |
| Breakeven | Upper strike − net debit = $97 |
| Time decay (theta) | Mixed — long and short puts partly offset decay |
You expect a stock to slide from $100 toward $90 on weak guidance, but shorting the stock outright carries unlimited risk if you’re wrong. The bear put spread caps that risk at $3 while paying $7 if you’re right to $90. Compared with buying a lone $100 put for $5, the spread costs less and breaks even sooner ($97 vs. $95) — you simply surrender the profits below $90, which you didn’t expect anyway.
When to use it
Use a bear put spread when you’re moderately bearish with a downside target and want capped risk instead of an open-ended short. As with the bull call spread, it is friendlier than a lone put when implied volatility is elevated, because the short put offsets some of the rich premium and vega you’d otherwise pay.
Common pitfalls
Confusing it with selling puts. A bear put spread is a debit — you pay to be bearish. Selling puts is bullish. Get the direction of the cash flow right.
Choosing strikes below where you expect the stock to land. Profit maxes at the lower strike; set it near your target, not far past it.
What to do with this
The bear put spread gives you downside exposure with a floor under your risk. Next, the same bullish and bearish views — but structured to collect premium up front rather than pay it.
Same directions, opposite cash flow: the credit spreads collect premium instead of paying it.
Next lesson · continue the courseOn to the bull put spread →