Bear Put Spread: how the position works

A long put financed by selling a lower-strike put. It profits as the underlying falls, down to the lower strike, and below that the two legs offset and nothing further is earned. It is the bearish mirror of the bull call spread and is used for the same reason: to buy a directional view without paying full premium for a tail you do not expect to reach.

Market view: Bearish — moderate, defined range
Opened for: Debit
Maximum profit: (K₂ − K₁) − net debit. Reached at or below the lower strike at expiry.
Maximum loss: The net debit paid. Reached at or above the higher strike at expiry.
Breakeven: K₂ − net debit, at expiry.

How it is built

Buy 1 put at the higher strike K₂
Sell 1 put at the lower strike K₁, same expiry

All figures above are quoted per share and settle at expiry. A standard equity option covers 100 shares, so multiply by 100 for a single contract.

Before expiry: the Greeks

Net short delta, damped by the short put and shrinking toward zero as the underlying approaches the lower strike. Vega is close to flat, which matters more here than in the call version: downside strikes carry the steepest skew, so an outright put purchase pays the most inflated volatility on the board and the spread structurally recovers part of it by selling a strike further down that same skew.

When to use it

When you expect a decline to a level you can name — a support price, a valuation floor, a prior gap — rather than a collapse. Because equity puts are expensive, the financing from the short leg is worth more here than the equivalent leg in a bull call spread, and this structure is often the cheapest defined-risk way to be short.

What goes wrong

Skew works against the exit as well as the entry. If volatility rises sharply the leg you are short rises faster than the one you are long, so a violent move down can be worth less than the payoff diagram suggests until expiry approaches.
Early assignment on the short put, which is most likely when it is deep in the money and carries little time value, leaving you long stock.
The profit stops at the lower strike. A crash pays exactly the same as a move to your target.

A worked example

AAPL at 230. Buy the 230 put and sell the 215 put, 40 days out, for a net 5.10 debit.

Net debit paid: $5.10 per share — $510 for one contract
Width of the spread: $15.00 (230 − 215)
Maximum profit: $990 ((15 − 5.10) × 100), at or below 215
Maximum loss: $510, at or above 230
Breakeven at expiry: $224.90 (230 − 5.10)

Commissions, exchange fees, financing and the bid/ask spread are excluded. On a multi-leg position the spread is usually the largest of these.

Common questions

Why use this instead of just buying a put?

Cost and volatility exposure. The short leg cuts the debit and largely neutralises vega, so you are not relying on implied volatility staying elevated. You give up everything below the lower strike to get that.

Related strategies

Educational only. This page explains how a structure behaves; it is not a recommendation to trade it. Options and futures carry substantial risk, and short and leveraged positions can lose more than the amount originally invested.