What is a 'Bear Spread'
A bear spread is an option strategy seeking maximum profit when the price of the underlying security declines. The strategy involves the simultaneous purchase and sale of options; puts or calls can be used. A higher strike price is purchased and a lower strike price is sold. The options should have the same expiration date.
BREAKING DOWN 'Bear Spread'
A bear spread is also a trading strategy used by futures traders who intend to profit from the decline in commodity prices while limiting potentially damaging losses. In an options bear spread, the options position makes money if the underlying goes down and loses if the underlying rises in price. A futures bear spread is created through the simultaneous purchase and sale of two of the same or closely related futures contracts. This is accomplished in the agricultural commodity markets by selling a future and offsetting it by purchasing a similar contract with an extended delivery date.Bear Put Spread Example
Assume an investor is bearish on stock XYZ when it is trading at $50 per share and believes the stock price will decrease over the next week. The investor purchases 10 put options with a strike price of $55 and writes 10 put options with a strike price of $45, which expire the next week for a combined total of $3,500. Therefore, the investor's maximum loss is the amount paid to implement the position, and the maximum profit is limited to the strike price of the long put less the strike price of the short put and the net premium paid. Assuming options have a contract size of 100, the maximum profit of the position is $6,500, or ($55 * 10 * 100)  ($45 * 10 * 100)  $3,500. In this bear put spread, the maximum profit is achieved if stock XYZ trades below the strike price of the short put, or $45. The breakeven point of a bear put spread is equivalent to the strike price of the long put option less the net premium paid.
Futures Bear Spread
Assume an investor is bearish on the Standard & Poor's 500 Index (S&P 500) when it traded at 2,000. The investor believes the S&P 500 will fall in the short term but rebound over the long term. Therefore, the investor creates a bear spread by selling short one S&P 500 futures contract expiring in six months for 1,995, and simultaneously purchases one S&P 500 futures contract expiring the next year for 1,997.

Bull Put Spread
A type of options strategy that is used when the investor expects ... 
Bear Put Spread
A type of options strategy used when an option trader expects ... 
Bear Call Spread
A type of options strategy used when a decline in the price of ... 
Bull Spread
An option strategy in which maximum profit is attained if the ... 
Bull Call Spread
An options strategy that involves purchasing call options at ... 
Strike Price
The price at which a specific derivative contract can be exercised. ...

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How do I set a strike price in an options spread?
Find out more about option spread strategies, and how to set the strike prices for bull call spreads and bull put spreads ... Read Answer >> 
How does the term 'in the money' describe the moneyness of an option?
Find out what in the money means about the moneyness of call or put options and what it indicates about the relationship ... Read Answer >> 
What techniques are most useful for hedging exposure to the telecommunications sector?
Learn about option strategies used to hedge a long stock position in the telecommunications sector, including bear put spreads ... Read Answer >> 
How do you use put options to profit from a bear market?
Learn how traders use put options in their trading strategies to remain profitable, even in a bear market. Everyday investors ... Read Answer >> 
How do I set a strike price for an option?
Learn about the strike price of an option and how to set a strike price for call and put options depending on risk tolerance ... Read Answer >> 
How do traders combine a short put with other positions to hedge?
Learn how sold puts can be utilized in different types of hedging strategies, and understand some of the more common option ... Read Answer >>