Bear Put Spread

A defined-risk bearish spread — capped gain, capped loss · payoff at expiration

Worked example

Buy the $100.00 put and sell the $90.00 put for a net $400.00 debit — capital required $400.00. Max profit $600.00, max loss -$400.00, breakeven $96.00.

At expiration: if the stock is at $110.00, the position shows a net P&L of -$400.00; if the stock is at $80.00, the position shows a net P&L of $600.00.

When to use

You expect a moderate decline — selling the lower put caps the downside profit but cuts the cost.
You want a cheaper, higher-breakeven bearish position than an outright long put.
You want both your risk and your reward known up front.

Common pitfalls

Your profit is capped below the lower strike — a crash earns no more than the spread's width minus cost.
You can still lose the entire net debit if the stock finishes above the higher strike.
Time decay and a volatility drop work against the long leg more than they help the short.