Bear put option spread strategy

A Bear Debit Put Spread, also known as a Vertical Put Spread, is a bearish position taken when you expect a modest downward price movement in a defined time frame. This spread is made up by buying a Put and writing a Put with a lower strike in the same expiration month.

Since the Buy Put has a higher strike price with a higher premium cost than the Write Put, you will be paying out more premium than you will be collecting, creating a debit. Since the Buy Put covers the Write Put, there is no margin requirement, and the theoretical maximum loss is the debit paid. The Bear Debit Spread benefits when the underlying asset falls to the level of the strike price of the Write Put. All support, education and training services and materials on the TradeStation Web site are for informational purposes and to help customers learn more about how to use the power of TradeStation software and services and to help provide other customer support.

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Bear Put Spread - Profit & Loss Graph

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Bear Put Debit Spread Vertical Options Strategy Long 1 XYZ OCT 43 Put 2.

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Maximum loss is realized at expiration at the strike price of the options bought 43 or greater. Risk Factor Effect Price Sensitivity Delta Position profit increases in value by the Delta value as the underlying asset price falls. Time Decay Theta Position profit increases or decreases in value by the Theta value based on the asset price in relation to the strike prices.

Volatility Sensitivity Vega Position profit increases or decreases in value by the Vega value depending on the asset price in relation to the strike prices.

Bear Put Spreads: A Roaring Alternative To Short Selling

Check the background of TradeStation Securities, Inc. Sitemap Contact Us About Us FAQ Terms of Use Security Center Privacy Policy Customer Agreements Other Information Careers. Price Sensitivity Delta Position profit increases in value by the Delta value as the underlying asset price falls.