A very bearish but limited risk option spread strategy, with less of a debit than just buying long put(s).


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Strategy: Bear Put, 1 strike down to ATM strike

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

Bear Put Option Graph

The Outlook: Very bearish. The stock must fall at least as much as your debit just to break even. The stock must fall more to show a gain.

The Trade: buy Put ATM and sell Put OTM.

Gains when: stock falls enough to overcome the initial debit.

Maximum Gain: difference in strike prices - initial debit.

Loses when: stock rises, does not fall, or does not fall enough.

Maximum Loss : limited to the initial debit.

Breakeven Calculation: Long Put strike - initial debit.

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

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

Volatility: after entry, increasing implied volatility is negative if the stock falls, but positive if the stock rises.

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 ATM plus Short Put OTM.


  • This Bear Put can be used if you are very bearish on a stock, but want to reduce the cost of entry compared to just buying an ATM 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. If you also sell a high IV put, you level the playing field.
  • The short put(s) will limit gains to the downside, so you don't want to be "too" bearish.
  • One sometimes difficult aspect of the Bear Put is that increasing implied volatility works against you if the stock falls as you expect. And often when a stock falls, implied volatility does goes up, because fearful stock owners are increasing the demand for puts.
  • This Bear Put can be used to anchor trading in a stock you expect to be volatile below the long strike. For instance, after entering the position, you could take gains on the short puts whenever there is a volatile day to the upside, and sell the puts again whenever there is a volatile day to the downside. Every gain taken on short put buybacks reduces your risk by the amount of the gain. It is possible to end up with a zero risk long put, also known as a "free ride". This is by no means a guaranteed outcome.
  • This Bear Put can be used as part of a "short stock enhancement" strategy. See the Stock Enhancement page for the bullish version. You can use the Bear Put with Short Stock in the same way to enhance a downward move in stock prices.


  • Since this is a very bearish position, the trader is expecting the stock to fall. If the stock rises instead, the trader would be wise to cut his losses short. If the stock rises above the long strike and the time to expiration drops to just a couple weeks, you can see from the option graph that the loss will be less than the maximum, and it is probably best to take it. Just sitting and waiting could result in the maximum loss.
  • If the stock falls most of the way to 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.
  • If the stock falls below the strike you sold and the time value of that put drops to .05 or .10, you should close the position. Otherwise you risk being "put to", meaning you must buy the stock at the short strike price. If that should happen, you can use your long put to put the stock to someone else at the long strike.


  • It is not usually recommended to adjust one part of a Bear Put. If you take a trading profit on the short puts when the stock rises for instance, you are actually increasing your maximum risk. You might think you will sell the puts again the next time the stock falls, but what if it doesn't?
  • It is possible to roll the entire bear put to higher strike prices if the stock rises, but that really amounts to closing one trade at a loss and opening another trade in hopes of a gain. Plus, the stock has not behaved bearishly yet you are taking a second bearish position.
  • If a bear put works out better than you expected and you want to go short, you can buy back the short puts, and exercise the long puts, so that you end up with just short stock, with all the inherent risks and rewards.
  • Or if the stock falls to 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, and lower strike prices, if you are still bearish on the stock.

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