An options strategy designed to profit from a moderate decline in the price of an underlying asset while limiting both risk and reward. A bear put spread involves buying a higher-strike put and selling a lower-strike put at the same expiration, while a bear call spread involves selling a lower-strike call and buying a higher-strike call. Both variations define maximum profit and maximum loss at the outset, making them popular among options traders who want directional exposure with controlled risk.
Example
“The trader opened a bear put spread on SPY by buying the $440 put and selling the $430 put for a net debit of $3.20, capping her maximum risk at the premium paid.”