Bear Put Spread
A bear put spread is a combination of a long put at one strike price and a short put with a lower strike price. Both options have the same expiration date.
This is a bearish position which allows a trader to establish a short market position with limited risk and low cost. The strategy makes sense in a low-volatility market.
Risk is limited to the net debit. Maximum profits are equal to the difference between strike prices minus the net debit.
Position Premium Dollar Premium Delta Buy one $20 crude oil put $1.17 $1,170 -.52 Sell one $18 put - Net debit - Net delta $0.50 $0.67 $500 $670 +.29 -.23 Maximum risk $0.67 per barrel $670 per position Maximum profit $1.33 per barrel $1,330 per position Break-even futures price $19.33 Position Premium Dollar Premium Delta Buy one $260 gold put $6.70 $670 -.50 Sell one $240 put - Net debit - Net delta $1.10 $5.60 $110 $560 +.15 -.35 Maximum risk $5.60 per ounce $560 per contract Maximum profit $14.40 per ounce $1,140 per contract Break-even futures price $254.40
THERE IS A RISK OF LOSS IN FUTURES TRADING AND IS NOT SUITABLE FOR
ALL INVESTORS. ONLY RISK CAPITAL SHOULD BE USED WHEN TRADING FUTURES.
Copyright 2008 Capitol Commodity Services, Inc. All Rights Reserved.
Education
- Futures Education
- Options Information
- Options Strategies
- Long At-the-Money Call
- Short Out-of-the-Money Call
- Covered Call
- Ratio Write
- Long Out-of-the-Money Call
- Long At-the-Money Put
- Short Out-of-the-Money Put
- Short Covered Put
- Bull Call Spread
- Bear Call Spread
- Bear Put Spread
- Bull Put Spread
- Long At-the-Money Straddle
- Long Strangle
- Short At-the-Money Straddle
- Short Strangle
- Call Ratio Backspread
- Put Ratio Backspread
- Synthetic Long Put
- Synthetic Long Call
- Synthetic Short Futures
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