What Is a Bear Put Spread? Strategy, Payoff, Risk and Example

# What Is a Bear Put Spread?

A bear put spread is a defined-risk bearish strategy created by buying a higher-strike put and selling a lower-strike put with the same expiry. It is normally entered for a net debit.

NIFTY Example

Suppose NIFTY is around 24,500.

•Buy 24,500 Put for ₹180

•Sell 24,200 Put for ₹80

Net debit = ₹100

Using an illustrative 65-unit lot:

Initial debit = ₹100 × 65 = ₹6,500

Maximum Profit

Strike difference:

24,500 − 24,200 = 300 points

Maximum profit per unit:

300 − 100 = ₹200

Maximum profit:

₹200 × 65 = ₹13,000

Maximum Loss

Maximum loss = net debit:

₹100 × 65 = ₹6,500

Breakeven

Breakeven = Higher Put Strike − Net Debit

= 24,500 − 100 = 24,400

At expiry:

•NIFTY ≥ 24,500 → maximum loss

•NIFTY = 24,400 → approximately breakeven

•NIFTY ≤ 24,200 → maximum profit

Payoff

| NIFTY at Expiry | Approx. P&L/unit |

|---:|---:|

| 24,600 | −₹100 |

| 24,500 | −₹100 |

| 24,450 | −₹50 |

| 24,400 | ₹0 |

| 24,300 | +₹100 |

| 24,200 | +₹200 |

| 24,000 | +₹200 |

Why Use It?

It provides a bearish position with defined maximum loss. Selling the lower-strike put reduces the cost of the long put but caps the profit.

Bear Put Spread vs Bear Call Spread

| | Bear Put Spread | Bear Call Spread |

|---|---|---|

| Entry | Debit | Credit |

| Structure | Buy high put + sell low put | Sell low call + buy high call |

| View | Bearish | Bearish to neutral |

| Max loss | Debit | Defined |

| Max profit | Strike width − debit | Credit |

Key Takeaways

•Buy higher put + sell lower put.

•Maximum loss is the debit paid.

•Maximum profit is limited.

•Breakeven = higher put strike − debit.

FAQs

Does NIFTY have to fall?

A sufficient fall below breakeven is needed for an expiry profit.

Is loss unlimited?

No. Maximum loss is the net debit.

Why sell the lower put?

To reduce the initial cost.

Final Thoughts

The bear put spread is a straightforward way to express a bearish view with defined risk.

Related reading: What Are Options? · What Is Option Delta?

> Disclaimer: Educational only; not financial advice. Options involve substantial risk.