The 5 points of The Bear Put Spread
The Bear Put Spread
What: A bear put spread is a semi non-directional strategy involving two option legs: a put that you purchase and one that you sell. What I like about the bear put spread is it's a limited return, limited risk strategy. It is cheaper than just straight up buying a put, even though there is some more commission due to the extra option leg.
How: If you are bearish to non-directional on a trade and perhaps it's reaching a resistance and there's no real confirmation yet that it might roll over. You had just come up with a plan in advance to go bearish at a specific price. You could create a contingency order in a brokerage account like this, for example: if V is at or greater than $78 (a strong resistance) you buy to open the $77.50 put and simultaneously sell to open the $70 put. The $77.50 put would cost approximately $1.91 per contract. The $70 strike would sell for approximately $0.31 cents. Therefore, the total debit on this trade would be $1.60 per contract.
When: In my opinion, I get into bear put spreads on two occasions. If I already own a put and my analysis has determine the bearish trade could slow down f