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Strategy: Bear Put , 1 strike down to 1 strike up

a.k.a. Bear Put Spread, Bear Put Vertical

Bear Put Spread Option Graph

The Outlook: Bearish. The stock must fall for the strategy to gain.

The Trade: buy Put ITM and sell Put OTM.

Gains when: stock falls.

Maximum Gain: difference in strike prices x number of shares represented - initial debit.

Loses when: stock rises beyond the breakeven point.

Maximum Loss : limited to the initial debit.

Breakeven Calculation: Long Put strike - initial debit.

Advantages compared to short stock: limited risk, less margin needed, greater leverage.

Disadvantages compared to short stock: gains are limited to the downside if stock falls below the sold strike.

Volatility: after entry, increasing implied volatility is positive if the stock rises, but negative if the stock falls. Since you are bearish (you expect the stock to fall), the best time for entry is when volatility is high, so that a return to normal (lower) volatility helps the strategy.

Time: after entry, the passage of time is positive if the stock falls, but negative if the stock rises.

Margin Requirement: none. The initial debit must be paid in full.

Variations: see the Vertical Spread Strategies page and the All Bear Put debit spread graphs page.

Synthetic Equivalent: Short Stock plus Long Call at the higher strike plus Short Put at the lower strike.


  • This Bear Put can be used if you are bearish on a stock, but want to reduce the cost of entry compared to buying an ITM Long Put. This is especially true if the options have a higher-than normal IV. Just buying a long put puts you at a disadvantage in terms of the higher price caused by the higher IV. Selling some high IV with the Bear Put levels the playing field.
  • The strategy has limited profit potential to the downside, so you don't want to be "too" bearish.
  • A situation that might fit this Bear Put strategy is one in which you believe a stock has "peaked" on over enthusiasm, which will increase the IV. If you expect a drop in the stock, the strategy can benefit from a drop in stock prices as well as the IV returning to normal levels.
  • This strategy will gain or lose dollarwise nearly the same as short stock over the range of strike prices used.


  • Since this is a bearish position, the trader is expecting the stock to fall. If the stock rises, the trader would be wise to cut his losses short. Using the example graph, if the stock price rose to about $52.50 at any time, the trade could be exited for about a $200 loss. Just sitting and waiting could result in a loss more than double that amount.
  • If the stock falls below the sold strike, the trader should stick with the position. As the option graph shows, just the passage of time is a benefit at any stock price near the sold strike.
  • Exiting a Bear Put near the expiration date depends on the current stock price:
    • If the stock is below the short strike and the time value of the short put drops to .05 or .10, you should buy back the short put, otherwise you risk having stock put to you. Selling the long put at the same time will lock in a gain.
    • If the stock is above the short strike, the short put will expire worthless and you don't need to do anything with it. You can exercise the long put if you are still bearish. Exercising a put when you don't own the stock will result in being short the stock, with all the risks inherent to that position.


  • It is possible to roll the entire bear put to lower strike prices if the stock drops, but that really amounts to taking a gain on one trade and opening another.
  • It is possible to roll the entire bear put to higher strike prices if the stock rises, but that really amounts to taking a loss on one trade and opening another. Plus, you are entering another bearish strategy yet the stock is acting bullishly.
  • Or if the stock is near the sold put strike with expiration near and you have made 80% or so of the total possible on the short puts, you can roll everything out to the next month, with the same or lower strike prices, if you are still bearish on the stock

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