Bear Put Spread

Function: Medium-Risk Speculation

Outlook: Bearish

    Establishing a Bear Call Spread involves buying a put at a higher strike price and selling a put with the same expiration date, but with a lower strike price than the put you bought.  Compared to most option spreads, the bear put spread is a low risk, low reward strategy.  You make a profit if the underlying stock goes below the price of the put option that you sold.  

    The profit for a bear put spread is maximized at the difference between the price of the put option you sold less the price you paid for the put option you purchased.