Stock Market · Option Strategies

Bear put spread

A bear put spread is a debit spread for moderately bearish views. You buy a put at a higher strike and sell a put at a lower strike, reducing your net cost.

Construction

Example: Nifty at 22,000, expecting a fall.

• Buy 21,900 put @ ₹180
• Sell 21,600 put @ ₹80
• Net debit: ₹180 − ₹80 = ₹100

Payoff

• Maximum profit: (21,900 − 21,600) − 100 = ₹200 × 75 = ₹15,000
• Maximum loss: ₹100 × 75 = ₹7,500 (if Nifty stays above 21,900)
• Breakeven: 21,900 − 100 = 21,800

> You need Nifty below 21,800 to start profiting. Below 21,600, profit is capped.

Bear put vs bear call spread

Bear put spreaddebit (you pay premium). Directionally bearish. Theta hurts.

Bear call spreadcredit (you collect premium). Neutral-to-bearish. Theta helps.

When you're more confident of a fall, use the bear put spread. It profits more from a large directional move. When you expect flat-to-slightly-down, use the bear call spread.

When to use

• After a strong rally when you expect a correction
• Before major events where you expect downside
• When you want directional bearish exposure but can't afford a plain put

Takeaway. Bear put spread: buy higher strike put, sell lower strike put. Pay a net debit, profit from market falling. Cheaper than a plain put but profit is capped.