{"id":45217,"date":"2023-03-24T11:03:25","date_gmt":"2023-03-24T10:03:25","guid":{"rendered":"https:\/\/staging.captrader.com\/glossar\/bear-put-spread\/"},"modified":"2024-03-21T13:39:04","modified_gmt":"2024-03-21T12:39:04","slug":"bear-put-spread","status":"publish","type":"glossar","link":"https:\/\/www.captrader.com\/en\/glossar\/bear-put-spread\/","title":{"rendered":"Bear Put Spread"},"content":{"rendered":"
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Put options <\/a>are primarily instruments for hedging against falling prices or speculating on falling prices. Since the purchase of a put option (long put) is initially associated with costs, the underlying must fall accordingly until a profit is made. The Bear Put Spread<\/strong> is a strategy where the cost of the purchased put option can be reduced by selling another put option, which in return also limits the maximum profit potential.<\/p>\n\n\n\n

Definition Bear Put Spread<\/h2>\n\n\n\n

A Bear Put Spread is a Option strategy<\/a>, which consists of a purchased put option<\/strong> (long put) and a put option sold<\/strong> (short put) with a lower strike price and the same remaining term.<\/p>\n\n\n\n

The Bear Put Spread belongs to the category of Vertical spreads<\/strong> and is also called a put debit spread or a long put vertical spread. The strategy is used when the market is bearish.<\/p>\n\n\n\n

P&L diagram of a Bear Put Spread<\/h2>\n\n\n\n

In the profit and loss diagram you can see that the profit of the bear put spread is limited if the underlying falls below the level of the short put. The maximum loss occurs when the underlying quotes above the long put on the expiration date.<\/p>\n\n\n\n

\"CApTrader_
The Bear Put Spread can be used in a similar way as a long put, but the cost and the maximum profit are lower.<\/figcaption><\/figure>\n\n\n\n

What to look for when trading a Bear Put Spread?<\/h2>\n\n\n\n

Similar to the long put, the bear put spread benefits from falling prices<\/strong>. By selling another option with a lower strike price, the costs and thus the maximum loss can be significantly reduced compared to a long put. On the other hand, the maximum profit is also limited.<\/p>\n\n\n\n

There are no fixed rules regarding moneyness and width of the spread and the bear call spread can be adjusted to your own market assessment and risk appetite.<\/p>\n\n\n\n

Maximum loss<\/h3>\n\n\n\n

The maximum loss occurs when the underlying on the expiration date at or above the price level of the long put<\/strong> quoted. Thus, both options expire worthless and the loss corresponds to the option premium paid at the beginning (net debit).<\/p>\n\n\n\n

Maximum loss = Net debit = Debit long put - Credit short put<\/p>\n\n\n\n

Maximum and realized profit<\/h3>\n\n\n\n

As soon as the underlying falls below the strike price of the long put, a profit is made. Since for the opening of the trade the Option premium<\/a> (Net Debit) has been paid, the underlying must fall by at least this amount before the overall trade is profitable.<\/p>\n\n\n\n

If the underlying falls between the strike prices of the two options, the profit (or loss) is calculated as follows:<\/p>\n\n\n\n

Profit = strike price long put - price underlying - net debit<\/p>\n\n\n\n

The maximum profit arises when the underlying on the expiration date at or below the price level of the short put<\/strong> quoted and corresponds to the width of the spread, less the option premium paid<\/p>\n\n\n\n

Maximum profit = strike price long put - strike price short put - net debit<\/p>\n\n\n\n

Break Even Point<\/h3>\n\n\n\n

The break even point is located between the two base prices<\/strong> at the price level where the profit of the long put corresponds exactly to the option premium (net debit).<\/p>\n\n\n\n

Break Even Point = Strike Price Long Put - Net Debit<\/p>","protected":false},"author":29,"featured_media":0,"template":"","class_list":["post-45217","glossar","type-glossar","status-publish","hentry"],"acf":{"blog_summary":"","blog_faq_schalter":"nein","faq_uberschrift":"","blog_faq_loop":null},"_links":{"self":[{"href":"https:\/\/www.captrader.com\/en\/wp-json\/wp\/v2\/glossar\/45217","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.captrader.com\/en\/wp-json\/wp\/v2\/glossar"}],"about":[{"href":"https:\/\/www.captrader.com\/en\/wp-json\/wp\/v2\/types\/glossar"}],"author":[{"embeddable":true,"href":"https:\/\/www.captrader.com\/en\/wp-json\/wp\/v2\/users\/29"}],"wp:attachment":[{"href":"https:\/\/www.captrader.com\/en\/wp-json\/wp\/v2\/media?parent=45217"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}