Bear Put Spread Strategy – A Smart Strategy for Falling Markets

What is a Bear Put Spread?

Imagine you think NIFTY will fall a bit — say from 22,000 to 21,800 — but not go too far down. So instead of buying just one expensive Put, you:

1. Buy a higher strike Put (more expensive)

2. Sell a lower strike Put (to reduce cost)

This forms a “Bear Put Spread.”

Strategy Type: Vertical Spread – using two Put options (one bought, one sold)

Market View: You expect the market to go down slightly, but not crash.

When it comes to options trading, understanding the greeks – Delta, Gamma, Theta, Vega, and Rho is critical for building effective strategies. So do check them out, also if you are beginner in options trading I would request you to first have Basic understanding of options ,Option moneyness , How to read option chain table.

Let’s explore Bear Put Spread Strategy with examples

When You Should Use Bear Put Spread?

• When the market looks weak, but not crashing

• You want a risk-defined trade with small capital

• You’re looking for a safer alternative to shorting futures or naked options

 

Ideal Scenario: Index moves gradually toward your lower strike (short Put) near expiry, like drifting toward your profit zone without wild moves.

When to Avoid Bear Put Spread?

• Entering during high implied volatility (it deflates your long Put)

• Using strikes too far apart (less probability of success)

• Holding till expiry during sudden reversals

Bear Put Spread Strategy Example (Reliance Stock):

• Current Price: ₹2,900

• You Buy 2,850 Put for ₹60

• You Sell 2,750 Put for ₹30

• Lot Size: 250

• Net Premium Paid = ₹30 × 250 = ₹7,500

 

What Can Happen?

Scenario 1: Price Falls to ₹2,700

• 2,850 Put = ₹150

• 2,750 Put = ₹50

• Net Gain = (150 – 50 – 30) × 250 = ₹17,500

 

Scenario 2: Price Falls to ₹2,800

• 2,850 Put = ₹50

• 2,750 Put = 0

• Net Gain = (50 – 0 – 30) × 250 = ₹5,000

 

Scenario 3: Price Stays Above ₹2,850

• Both puts expire worthless

• Max Loss = ₹7,500 (net premium paid)

 

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Bear Put Spread Strategy Payoff Graph

 

• Flat loss if price doesn’t fall

• Profit rises as price drops — max gain at or below lower strike

• Range-bound, risk-defined strategy

 

Strategy Summary Table:

Component	Action	Strike	Premium
Long Put	Buy	₹2,850	₹60
Short Put	Sell	₹2,750	₹30
Net Premium	–	–	₹30
Max Profit	–	–	₹20,000 (spread – premium × lot)
Max Loss	–	–	₹7,500 (net premium × lot)

 

Greek Impact on Bear Put Spread Strategy

Greek	Effect
Delta	Negative (mild bearish bias)
Theta	Slightly Negative (loses value slowly over time)
Vega	Moderate – sensitive to volatility rise (helps Long Put more than hurts Short Put)

 

 

Strike Price Selection Tips:

• Choose Long Put slightly OTM or ATM

• Choose Short Put lower OTM

• Make sure the spread is not too wide (100–200 points works well)

• Ideal for high IV (volatility) environments

 

 

Do’s and Don’ts

Do’s:

• Use when expecting limited downside

• Always calculate risk/reward upfront

• Use monthly expiry for better time decay management

 

Don’ts:

• Avoid very wide strike gaps unless you expect a big move

• Don’t use this strategy in sideways or bullish markets

• Don’t hold to expiry blindly — monitor your P&L

 

Pro Tips:

• Combine with technical support zones or news triggers

• A great strategy for budget traders — limited risk and smaller premium than buying a naked Put

• Works well on stocks post weak results or negative sentiment

 

 

Bear Put Spread Cheat Sheet

Feature	Value

 

 

Bear Put Spread Strategy Quick Summary:

Factor	Bear Put Spread

 

If you’re looking for a broker that offers speed, transparency, and advanced tools, Dhan is one of the best choices today. With zero brokerage on delivery trades and intuitive charts, Dhan is built for both beginners and pro traders. Invest in Stocks, F&O, Commodities, Currency, ETFs, Mutual Funds, SGBs, IPOs, SIPs and much more.

Click Here to Open Your Free Dhan Account
No paperwork. No account opening charges. Get started in 5 minutes! Dhan also offers advanced tools like TradingView & Options Trader built-in.

 

Conclusion – Bear Put Spread Strategy

The Bear Put Spread is one of the safest and smartest ways for beginners to trade when they have a bearish outlook on a stock or index but want to limit their risk.

With this strategy, you’re essentially saying:

“I think the market will go down, but I don’t want to risk a lot of capital in case I’m wrong.”

By buying a Put and selling a lower strike Put, you:

• Reduce your upfront cost (compared to buying just a Put)

• Limit your maximum loss

• Define your maximum profit

• Get a balanced trade that benefits from both price drop and time decay

Final Tip:

Use Bear Put Spread when you’re moderately bearish, and always align your strikes with support/resistance zones on the chart. This adds a technical edge to your options strategy.

Please do not just speculate while trading in stock market in any segment, instead look for learning new strategies such as

Single Leg Options Strategies for Indian Markets

Call Butterfly Spread Strategy

Bear Call Ladder Strategy

Bull Put Spread Strategy

Covered Call Option Strategy

Bull Call Spread Strategy

Call Ratio Back Spread Strategy

Iron Condor Strategy 

 

Disclaimer:

This content is intended for educational purposes only and does not constitute financial or investment advice. Options trading involves substantial risk and may not be suitable for all investors. Past performance is not indicative of future results. Always do your own research or consult a SEBI-registered financial advisor before making any trading decisions. The examples provided are for illustration only and do not represent any recommendations.