---
description: "A bearish vertical spread buying a near-ATM put at K1 and selling a lower-strike OTM put at K2 < K1 for a net debit, profiting if the stock falls toward K2."
tags: [options, speculation, bearish, vertical-spread]
---

# Bear Put Spread

**Section**: 2.9 | **Asset Class**: Options | **Type**: Speculation

## Overview
The bear put spread is a vertical spread consisting of a long position in a close to ATM put option with strike K1, and a short position in an OTM put option with a lower strike K2 (K2 < K1). This is a net debit trade. The trader's outlook is bearish: the strategy profits if the stock price falls. This is a capital gain strategy.

## Construction
- Buy 1 put option at strike K1 (near ATM), paying debit D
- Sell 1 put option at strike K2 (OTM lower, K2 < K1), same expiry

Net debit: D = premium paid for K1 put - premium received for K2 put

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

- Breakeven: S* = K1 - D
- Max profit: P_max = K1 - K2 - D  (achieved when S_T <= K2)
- Max loss: L_max = D  (if S_T >= K1 at expiry)

## Key Conditions / Signals
- Moderately bearish outlook; expects stock to fall toward or below K2 by expiry
- Prefer when implied volatility is low (cheaper debit to enter)
- Lower cost and lower risk than buying a naked put; downside profit is capped at K2

## Notes
Both profit and loss are limited. The maximum gain equals the spread width minus the net debit. Appropriate when the trader has a bearish view but wants to reduce the premium outlay compared to a simple long put.