Option Strategy with live account – Bear put spread.
Option Strategy with live account – Bear put spread.
Contents
- 1 Bear Put Spread: An Options Strategy for a Bearish Market
- 2 How Bear Put Spread Works
- 3 Profit & Loss Calculation
- 4 Example of a Bear Put Spread (Live Market Scenario)
- 5 Scenario:
- 6 Steps to Execute:
- 7 Profit & Loss Outcomes:
- 8 Key Advantages
- 9 Disadvantages
- 10 Live Trading & Monitoring with a Real Account
- 11 Final Thoughts
- 12 Option Strategy with live account – Bear put spread.
- 13 Trading Downtrends Effectively with Bear Put Spreads
- 14 Option Strategy SBIN BEAR PUT RATIO SPREAD
- 15 Bear Put Spread
Bear Put Spread: An Options Strategy for a Bearish Market
The Bear Put Spread is an options trading strategy used when a trader expects a moderate decline in the price of an underlying asset. This strategy involves buying a put option at a higher strike price and selling another put option at a lower strike price with the same expiration date.
How Bear Put Spread Works
- Buy a Put Option (Higher Strike Price, Higher Premium)
- Sell a Put Option (Lower Strike Price, Lower Premium)
- Net Debit Strategy – Since you are paying more for the higher strike put than receiving for the lower strike put, this strategy requires an initial net debit (cost).
Profit & Loss Calculation
- Maximum Profit = (Higher Strike – Lower Strike) – Net Debit Paid
- Maximum Loss = Net Debit Paid
- Breakeven Price = Higher Strike Price – Net Debit Paid
Example of a Bear Put Spread (Live Market Scenario)
Scenario:
Stock: Nifty 50 (Trading at ₹22,000)
Strategy: Bear Put Spread
Expiration: Next Monthly Expiry
Steps to Execute:
- Buy a 22,100 Put Option at ₹150
- Sell a 21,900 Put Option at ₹80
- Net Cost (Debit) = ₹150 – ₹80 = ₹70
Profit & Loss Outcomes:
| Nifty Price at Expiry | Buy 22,100 Put (₹150) | Sell 21,900 Put (₹80) | Net P/L |
|---|---|---|---|
| 22,100+ | ₹0 | ₹0 | -₹70 (Max Loss) |
| 22,000 | ₹100 | ₹0 | +₹30 |
| 21,900 | ₹200 | ₹100 | +₹130 (Max Profit) |
| 21,800 | ₹300 | ₹200 | +₹130 (Max Profit) |
Key Advantages
Limited Risk – You know your maximum loss in advance.
Reduced Cost – Cheaper than buying a single put.
Good for Moderate Bearish Trends – You profit from moderate price declines.
Disadvantages
Capped Profit Potential – Unlike a single put, your profit is limited.
Time Decay Effect – If the stock doesn’t move quickly, the trade can lose value over time.
Live Trading & Monitoring with a Real Account
- Platforms: You can execute this trade on ICICIDirect, Zerodha, Upstox, AngelOne, or Groww.
- Real-Time Monitoring: Use Open Interest (OI) data, Delta, and Implied Volatility (IV) analysis to track performance.
- Exit Strategy: Consider closing the spread early if the stock nears the lower strike price.
Final Thoughts
The Bear Put Spread is a powerful options strategy for traders expecting a moderate market decline with limited risk and controlled profit potential. Would you like assistance in placing this trade on a specific platform?
