Option Strategy with live account – Bear put spread.

Option Strategy with live account – Bear put spread.

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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

1. Buy a Put Option (Higher Strike Price, Higher Premium)
2. Sell a Put Option (Lower Strike Price, Lower Premium)
3. 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:

1. Buy a 22,100 Put Option at ₹150
2. Sell a 21,900 Put Option at ₹80
3. Net Cost (Debit) = ₹150 – ₹80 = ₹70

Profit & Loss Outcomes:

 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?

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