A Bear Put Spread is a type of options strategy where an investor or trader expects a moderate-to-large decline in the price of a security or asset and wants to reduce the cost of holding the option trade. A bear put spread is achieved by purchasing put options while also selling the same number of puts on the same asset with the same expiration date at a lower strike price. The goal of this strategy is to reduce the cost of holding the option trade.How does it work?When you enter into a Bear Put Spread, you are buying a put option and selling a put option with a lower strike price. The difference between the strike prices is the amount of premium you pay for the trade.Why would I use this strategyThere are two main reasons why you might use a Bear Put Spread. First, if you are bullish on a stock or asset but expect it to fall in the short-term, this strategy can help you take advantage of that expected decline. Second, this strategy can be used as a way to hedge your position and protect yourself from potential losses.
