Definition
Bear Put Spread
A bear put spread buys a higher-strike put and sells a lower-strike put to profit from a moderate fall at lower cost.
You buy a put near the money and sell a lower-strike put against it. The sold put offsets part of the premium, lowering your cost but capping your gain at the lower strike. It is the bearish mirror of a bull call spread, with defined risk and reward.
NSE traders deploy bear put spreads when they expect Nifty or a stock to drift down within a range, rather than crash. The maximum loss is the net premium paid and the maximum profit is the distance between strikes minus that premium — a cheaper, lower-risk way to express a bearish view than buying a naked put.
Related terms
- Protective PutA protective put is buying a put option on shares you own to insure against a fall in price.
- Bull Call SpreadA bull call spread buys a lower-strike call and sells a higher-strike call to bet on a moderate rise at lower cost.
- Bull Put SpreadA bull put spread sells a higher-strike put and buys a lower-strike put to earn premium with a mildly bullish view.
- Put OptionA put option gives its buyer the right, but not the obligation, to sell an asset at a fixed strike price before expiry — buyers profit when the price falls.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.