---
description: "A bear put spread extended by selling an additional lower OTM put at K3, financing the spread while capping downside profit and creating unlimited risk below K3."
tags: [options, income, bearish, ladder]
---

# Bear Put Ladder

**Section**: 2.17 | **Asset Class**: Options | **Type**: Income

## Overview
The bear put ladder is a vertical spread consisting of a long put at K1 (near ATM), a short put at K2 (OTM, K2 < K1), and a short put at K3 (further OTM, K3 < K2). It is a bear put spread financed by selling an additional OTM put at K3. This adjusts the outlook from bearish (bear put spread) to conservatively bearish or even non-directional with an expectation of low volatility.

## Construction
- Buy 1 put option at strike K1 (near ATM)
- Sell 1 put option at strike K2 (OTM, K2 < K1)
- Sell 1 put option at strike K3 (further OTM, K3 < K2), same expiry

Net debit or credit H  (assuming K3 + K2 - K1 + H > max(H, 0))

## Payoff Profile
f_T = (K1 - S_T)+ - (K2 - S_T)+ - (K3 - S_T)+ - H

- Upper breakeven: S*_up = K1 - H  (if H > 0)
- Lower breakeven: S*_down = K3 + K2 - K1 + H
- Max profit: P_max = K1 - K2 - H  (achieved in zone [K3, K2])
- Max loss: L_max = K3 + K2 - K1 + H  (unlimited as S_T -> 0)

## Key Conditions / Signals
- Conservatively bearish; expects stock to fall toward K2 but not collapse through K3
- Low implied volatility environment expected after entry
- The additional short put at K3 reduces cost but creates unlimited downside risk

## Notes
This is an income strategy in the sense that selling the K3 put finances the spread. However, unlimited loss exposure arises if the stock collapses well below K3. Risk management requires a stop-loss below K3.