Bear Put Spread (Debit)

Buy a put and sell a lower put for a cheaper, defined-risk bearish bet with capped reward.

A bear put spread is the bearish mirror of the bull call spread: buy a put and sell a lower-strike put in the same expiry.

Market outlook

Moderately bearish — you expect a move down toward the short strike, not a crash.

Construction

• Buy 1 put at higher strike $K_2$.
• Sell 1 put at lower strike $K_1$ ($K_1 < K_2$).
• Net debit $D = P_2 - P_1$.

Risk / reward

• Max loss: $D$.
• Max profit: $(K_2 - K_1) - D$
• Breakeven: $\text{BE} = K_2 - D$

When to use it

• Bearish but want defined risk and a lower cost than a long put.
• Useful when put IV (skew) makes outright puts pricey.

Risks & management

• Capped gains below $K_1$.
• Time decay helps the short leg and hurts the long leg; the spread structure largely nets this out versus a single long put.

Example

Stock at $50. Buy $50 put for $2.00, sell $45 put for $0.70. Debit $1.30. Max profit $3.70 (at $45−), max loss $1.30, breakeven $48.70.