BEARISH
Bear Put Spread Strategy Lab
What is a bear put spread?
A bearish debit spread created by buying a put option and selling another put with a lower strike price.
This reduces the total cost of the trade compared to simply buying a put, but caps your maximum profit.
Execution Legs:
1
Sell a put at strike A (lower strike).
2
Buy a put at strike B (higher strike).
BearishLimited ProfitLimited Loss
Institutional Playbook & Ideal Timing
🎯 Ideal Timing & Volatility Environment:
Low IV regime (IV Rank < 25%) where options are cheap. Ideal 2–3 weeks before earnings announcements, expected breakout beyond Put/Call walls, or major macro volatility events.
🎯 Strike & DTE Target:
30 to 45 DTE. Sell the 30-delta strike at support/resistance, buy the 15-delta wing for protection.
🛡️ Exit & Risk Rules:
Take profit at 50% of max profit (for credit/neutral) or 100%–200% ROI (for debit). Cut losses at 100% of debit paid (or 2x credit collected). Close before expiration if delta expands beyond 70.
Greeks Sensitivity & Mechanics
⚡ +Vega (Long Vol)
Benefits from IV expansion. Hurt by post-earnings IV crush.
⏳ −Theta (Decay Cost)
Loses premium value every day; needs swift price displacement.
🚀 +Gamma (Convexity)
Profit accelerates as underlying moves further in your direction.
Directional Bias (Δ)
Negative Delta (−Δ): Profits as underlying stock drops.
Interactive Payoff Simulator
Expiration Payoff
Interactive Parameters
Stock Price ($)
$100.00
Days to Expiry (DTE)
30 Days
Lower Strike A ($)
$90.00
Higher Strike B ($)
$110.00
Max Profit
$1000.00
Max Loss
$1000.00
Breakeven
$107.50
Risk / Reward
1 : 1.50
Net Delta (Δ)
-0.42
Net Gamma (Γ)
+0.015
Net Theta (Θ)
+2.45
Net Vega (ν)
+3.50