Bear Put Spread

A put bought with a lower put sold in the same expiration: it opens for a debit and gains as the underlying falls, with both the gain and the loss capped.

Also called Long put spread, Put debit spread

Outlook

Bearish

Family

Debit Spread

Level

Intermediate

Legs

2 legs

Expirations

1 expiration

Opens for

Debit

Maximum profit

Limited

Maximum loss

Limited

Legs at the reference strikes this page's diagrams are drawn from

Leg	Side	Contract	Ratio	How the strike is chosen
B	Long	Put 100	1	At the money
A	Short	Put 95	1	5.00 points further out of the money than B

What it is

A put bought at B and a lower put sold at A, in the same expiration. The sold put pays for part of the bought one, so the structure opens for a debit smaller than the long put alone — and caps the gain at the same time.

It is the same view as a long put with the tail sold off. Since a long put’s profit was already limited by the underlying’s floor at zero, what the short leg gives up is the part of the fall below A.

The payoff

At expiration

At expiration the position loses the full debit above strike B, rises in a straight line as the underlying falls between B and A, and is flat at its maximum gain below A.

• Above B — both puts expire worthless and the debit is lost.
• Between A and B — the long put is in the money; the result rises as the underlying falls.
• Below A — both are in the money, the spread is worth its full width, and the gain is fixed at (B − A) less the debit.

Break-even is B minus the debit.

How it behaves before expiration

Today, before expiration

Today's value is a shallow curve between the two flat regions, crossing the expiration line so that it sits above it at the high end and below it at the low end.

The dashed curve crosses the expiration line: above B the long put’s remaining time value makes the position worth more than its terminal value, and below A the short put’s remaining time value makes it worth less.

A bear put spread that is already fully in the money therefore shows less than its maximum gain until expiry approaches. The profit is earned; it is simply not collectable yet.

The Greeks

Delta is negative, largest in magnitude between the strikes and shrinking once both legs are deep in the money.

Gamma is positive near B and negative near A.

Theta changes sign across the strikes, negative while out of the money and positive once comfortably in.

Vega is small, the two legs largely offsetting.

Where it lives in the volatility environment

Practitioners generally observe that put skew makes the lower strike relatively expensive to buy and relatively attractive to sell, so a bear put spread is often cheaper than the distance between the strikes would suggest at a flat volatility — and that the same skew works against the position when it is unwound.

What can go wrong

• The fall overshoots the cap. Below A the position stops gaining.
• Assignment on the short put leaves 100 long shares per contract against a long put, and the capital to carry them.
• Time costs money above B, more slowly than an outright long put but not nothing.
• Both legs must be closed, or what remains is an unhedged short put.

Building it in Option Panel

Open Build Strategy and pick Bear Put Spread. The builder seeds the long put at B and the short put at A, with strikes by delta, percentage or points from the price, an offset from the other leg, or an exact strike.

Back to the encyclopaedia · What-if analysis in the docs

Related strategies

• Long Put — the same view without the cap.
• Bear Call Spread — the same view taken in as a credit.
• Bull Put Spread — the same two strikes, from the other side.