Bear Put Spread: Complete Beginner’s Guide

🤔 New to options? It helps immensely to understand both the long put and short put strategies before continuing.

Bear Put Spread: Trade Components

Here are the trade components of a bear put spread:

• Buy 1 put option (closer to the money)
• Sell 1 put option (further out of the money)
• Both options are puts
• Both have the same expiration

Ideally, the trade is entered as a single vertical spread. This structure applies to all vertical spreads, whether bull or bear, call or put. Below is how the setup appears on the TradingBlock dashboard:

You can also leg into a bear put spread, but just know you’re carrying substantial risk, especially on the short put side, while unhedged.

Market Outlook: When to Buy a Put Spread

The bear put spread is a defined-risk, bearish strategy. It’s best used when you expect the stock to move lower and implied volatility is low to moderate, but forecasted to rise. This helps keep entry costs down and can provide a boost if IV increases after entry.

Here are a few scenarios where this trade may make sense:

1. Directional Bearish View: If you expect a stock to move lower but not collapse, a bear put spread lets you profit from the move while keeping costs lower than buying a naked put.
2. Stock/ETF Hedge: If you’re worried about upcoming earnings, economic data, or even tariffs, the bear put spread can be a cost-effective hedge to mitigate downside exposure on your underlying asset, whatever that may be.‍
3. Custom-Tailored Bearish Exposure: The right combinations of options can allow you to dial in and profit from almost any forecasted market direction. For example, if XYZ is trading at $105 and you expect a pullback to $100, you might buy the 105 put and sell the 100 put.

Bear Put Spread: Payoff Profile

Let’s now explore the max profit, breakeven, and max loss scenarios for this trade. 

Maximum Profit

With a bear put spread, max profit is capped and occurs if the stock finishes below the short put strike price at expiration.

Max Profit = Strike Width – Net Debit Paid

Let’s say you buy the 110/100 bear put spread on ABC for a $4.00 debit. Here's the setup:

• Short Put Strike: 100
• Long Put Strike: 110
• Net Debit Paid: $4.00‍
• Max Profit: $600 (if the stock finishes below $100)

If ABC drops to $100 or lower by expiration, both puts are in the money and the spread pays out its full width ($10), minus the $4 debit you paid.

Breakeven

To reach breakeven on the debit put spread, the stock must drop enough to offset the premium paid, as calculated below:

Breakeven = Long Put Strike – Debit Paid

Using our ABC example:

• Long Put Strike: 110
• Debit Paid: $4.00‍
• Breakeven: $110 – $4.00 = $106.00

At $106, the spread value equals your cost, so there's no gain or loss. Below that, profits start to kick in.

Maximum Loss

Max loss occurs if the stock finishes above the long put at expiration, meaning both puts expire worthless.

Max Loss = Net Debit Paid

For our trade:

• Debit Paid: $4.00‍
• Max Loss: $400 per spread

Notice that it doesn’t matter how high ABC goes — once it’s above the long put strike price at $110, our max loss is locked in. At that point, both puts expire worthless, and we’re left with the full debit paid for the spread.

Enough theory - let’s check out a real-world trade!

📖 More neutral than bearish? Check out the bear call spread here!

Real-World Trade: GLD Put Spread

In this trade example, we’re bearish on gold. We have decided to buy a put spread on GLD (SPDR Gold Trust SPDR Gold Shares ETF). We chose this product because GLD offers:

1. Accurate spot tracking of gold
2. Decent bid/ask spreads and low slippage
3. Numerous strike prices and expirations

GLD is currently trading at 304.48, and we expect a 5% downward move over the next 6 weeks or so. Let’s head to the TradingBlock dashboard to find two strikes and an expiration cycle that works for us:

And now let’s get into the nitty gritty.

Trade Details:

• Underlying: GLD
• Expiration: 37 days 
• Stock Price: $304.48
• Buy 295 Put: $4.17
• Sell 290 Put: $2.82
• Net Debit: $1.35 (or $135 total)
• Max Profit: $5.00 – $1.35 = $3.65 (or $365 total)
• Max Loss: $1.35 (or $135 total)
• Breakeven Price: $293.65

So, we bought a 295/290 5-point put spread on GLD for a net debit of $1.35. This means that the most we can lose is $135, which occurs if GLD is trading at $295 or higher on the expiration date. 

Our max profit here is $365, and it's reached when GLD is trading at $290 or lower on expiration.

Let’s explore a few different trade outcomes:

GLD Put Spread: Winning Trade Example

Let’s fast-forward 37 days to expiration. GLD started strong, rallying against us in the first week, but then slowly began to sell off, ultimately closing below the $290 strike price. An excellent outcome for us.

Trade Outcome:

• GLD Price: $304.48 → $288 📉
• Expiration: 37 days → 0
• Buy 295 Put @ $4.17 → $7.00 📈
• Sell 290 Put @ $2.82 → $2.00 📉
• Final Spread Value: $5.00‍
• Net P/L: $3.65 ✅

This was a great outcome. Both our options were in the money at expiration, resulting in 100% intrinsic value:

• 295 long put closed at $7.00
• 290 short put closed at $2.00

The trade closed at exactly $5.00, but since we paid $1.35 to enter it, our net profit is $3.65 (or $365 per spread).

I like this trade because we actually profited more than if we had bought the 295 put outright, which would have been much riskier and returned only $2.80 in this scenario.

GLD Put Spread: Losing Trade Example

In this trade outcome, GLD moved against us, causing a maximum loss of the entire premium paid for the trade. Let’s see how it played out:

• GLD Price: $304.48 → $308 📈
• Expiration: 37 days → 0
• Buy 295 Put @ $4.17 → $0.00 ❌
• Sell 290 Put @ $2.82 → $0.00 ❌
• Final Spread Value: $0.00
• Net P/L: –$1.35 (–$135 total) ❌

This trade got ugly in the last two weeks leading up to expiration. Had we closed the spread around 19 days to expiration, we could have sold it for around $3.70, locking in a 174% return on our original $1.35 debit. 

But we rolled the dice, and it cost us—GLD moved against us into expiration, forcing us to take a max loss.

• 295 long put expired at $0.00 ❌‍
• 290 short put expired at $0.00 ❌

Strike Price and Expiration Selection

Two questions you must ask yourself before choosing your strikes and expiration:

1. How bearish am I?
2. When do I expect the move to happen?

Let’s start off with number one, which pertains to strike price selection.

Choosing Strike Prices

Generally speaking, assuming the debit paid remains the same, the wider your put spread, the more bearish you are. The downside of wider spreads is that they require a larger move to reach max profit. If the stock falls modestly, you may not see any return. 

Take a look at the bullets below that illustrate this. We are assuming all of these trades cost us a $1 debit:

• $100/$97 (3-point) → Max profit: $2.00, Max loss: $1.00, ~40% prob. of profit
• $100/$95 (5-point) → Max profit: $4.00, Max loss: $1.00, ~30% prob. of profit
• $100/$90 (10-point) → Max profit: $9.00, Max loss: $1.00, ~15% prob. of profit

Expiration Selection

When choosing your expiration cycle, keep in mind that since the trade is net debit, time is not on your side. You want to get in and out as quickly as possible — but not so close to expiration that you don’t have time to adjust if the trade moves against you.

I like to target put options with around 6 weeks to expiration. It gives the trade room to work, while still benefiting from acceleration in time decay if the stock moves in my favor early.

Choosing Deltas on Put Spreads

In options trading, delta is a key Greek — it tells us how much an option’s price will move with a $1 move in the stock. It also gives a rough idea of the probability that an option closes in the money.

The former is why I always check deltas before placing any trade. Here’s the range I typically look for in a bear put spread:

• Long Put: Delta 0.35–0.60 – Decent chance of expiring ITM; affordable.‍
• Short Put: Delta 0.15–0.35 – Helps offset premium while keeping assignment risk low.

Bear Put Spreads and Time Decay

In a stable or slow-moving market, where the stock isn’t making sharp moves and implied volatility stays steady, option premiums lose value over time. Since we’re net buyers in a bear put spread, this decay works against us.

The closer we get to expiration, the faster that decay accelerates. And because the long put holds more value than the short put, we feel that loss more on the front leg. 

Time is not your friend here—you need price movement, sooner rather than later.

Option Theta in Bear Put Spreads

In options trading, theta is the option Greek related to time. Theta tells us how much value an option may shed in a single day, assuming little to no change in the underlying price and IV levels.

Since a bear put spread is net long options, we want low theta on the long put side and high theta on the short put side to help offset decay.

Of course, since the long put is closer to the money, its theta value will always be higher in absolute terms.

Here are the theta levels I prefer on bear put spreads: 

• Long Put: Theta –0.05 to –0.15 – Heavier decay on this leg since it holds most of the value.
• Short Put: Theta +0.03 to +0.07 – Helps offset some decay, but not enough to carry the trade.‍
• Net Theta: –0.05 to –0.10 – Slightly negative overall; time is not your friend.

Bear Put Spread and Implied Volatility

Generally speaking, put options further out of the money have higher implied volatility (IV) than those closer to the money. That’s why, in a bear put spread, the short leg often has slightly higher IV than the long leg. 

Since higher IV means pricier options, this works in our favor on the short side — helping lower the overall cost of the trade.

We can see this on SMH (VanEck ETF Trust VanEck Semiconductor ETF) below on the TradingBlock dashboard:

When I trade put spreads, I generally aim for the following implied volatility (IV) levels. Keep in mind this is a ballpark range and varies widely. E.g., IV levels on ETFs are typically much lower than on stocks. 

• Short Put IV: 20%–40%
• Long Put IV: Below short IV

Bear Put Spread: Options Chain

Now let’s take everything we learned and find a real-world put spread trade that matches our criteria on a TradingBlock options chain:

I like this trade because:

• Risk/Reward: $1.19 to make $3.81 — solid 3:1 payoff.
• Theta: Low decay on the long leg.
• IV: Selling a higher-IV put against a lower-IV long put helps reduce cost.‍
• Delta: Low (~0.30), but it’s cheap.

Managing a Bear Put Spread

Options trading isn’t passive, and that includes defined-risk trades, such as debit spreads. Bear put spreads require timing, attention, and smart exits. Remember, if the trade goes your way, action will need to be taken, or you will be assigned, auto-exercised, or both.

Take Profits Before Expiration

If your bear put spread is nearing max profit, close it early. I say this a lot for a reason! Holding a winning or partially winning trade into expiration can create issues you don’t want. Here are a few potential scenarios:

• Only the long put finishes in the money → Your broker will likely auto-exercise it, forcing you to sell 100 shares of stock
  
• Both legs finish in the money → Your long put is auto-exercised, and the short put is assigned. It’s an offsetting trade, but you’ll often get hit with extra fees, usually greater than commissions. 

Rolling Strike Prices

You’ve got plenty of flexibility if you want to reposition your bear put spread:

• Roll the short leg lower to increase potential profit.
• Roll the long leg closer to the money if the stock jumps and you want to rebuild delta.
• Roll both legs down to reset the entire trade (4-leg vertical roll)

You can even buy a call spread if you're uncertain which direction the trade will take, but are confident it will move. This effectively creates an iron condor (as long as the strike width and expiration remain the same).

Rolling Expirations

If you need more time, roll the trade to a different expiration cycle. But roll both legs together — if you roll just one, you may be left with naked directional exposure. Use a 4-leg order to keep it clean and risk-defined.

3 Risks of Bear Put Spread

Bear put spreads are defined-risk trades, but that doesn’t mean they’re risk-free. Here are the three biggest to watch out for:

1. Assignment Risk

This is something to watch out for on winning trades. The short put will only be in the money after your long put is in the money — but knowing when assignment risk is high can save you from the headache of being assigned (and the extra fees that come with it).

The short put in a bear put spread can be assigned if:

• It’s in the money
• You’re close to expiration
• There’s little or no extrinsic value left

The deeper in the money the short put becomes, and the closer the expiration date is, the more likely the counterparty will exercise their long put. 

If that happens, you’ll be assigned 100 long shares — and then forced to exercise your long put to flatten the position.

2. Liquidity Risk

Options on thinly traded stocks or ETFs can have extremely thin markets. Signs of low liquidity include:

• Wide bid/ask spreads
• Low open interest
• Low volume

If you're trading illiquid strikes, you'll likely have issues getting filled at a decent price, particularly when volatility spikes. Read more about option liquidity in our dedicated article. 

3. Pin Risk

If the underlying is trading close to your short put strike near expiration, sell the spread. Stocks can move fast in the final minutes, and if it closes exactly at the strike, you’ll have a 50/50 chance of being assigned. This is assuming you haven’t decided to sell out of your long put - which all traders do unless they want to be short stock. 

Bear Put Spreads and The Greeks

In options trading, the Greeks are a set of risk metrics that help estimate how an option’s price will respond to changes in key market variables. Here are the five most important Greeks to know:

• Delta – Measures how much the option price moves relative to the underlying stock.
• Gamma – Tracks how Delta changes as the stock moves.
• Theta – Measures time decay, showing how much value the option loses daily.
• Vega – Sensitivity to implied volatility, affecting option price.‍
• Rho – Measures impact of interest rate changes on the option price.

And here is the relationship between bear put spreads and these Greeks:

Vertical Spread Calculator

Check out our vertical spread calculator below to visualize how bear put spreads perform under different markets, conditions, and times.

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⚠️ Bear put spreads involve defined risk, but still require a solid understanding of how options work. This strategy may not be suitable for all investors. Trade outcomes can be affected by commissions, fees, and slippage—none of which are reflected in the examples above. Read The Characteristics and Risks of Standardized Options before trading.