Online Trading Concepts

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Bear Put Spread Profit, Loss, & Breakeven

Bear Put Spread

  1. Bear Put Spread Option Strategy
  2. Bear Put Spread Profit, Loss, & Breakeven
  3. Bear Put Spread vs Buying a Put

The following is the profit/loss graph at expiration for the Bear Put Spread in the example given on the previous page.

Bear Put Spread profit and loss graph

Break-even

The breakeven point for the bear put spread is given next:

To illustrate, the trader purchased the $47.50 strike price put option for $0.44, but also sold the $45.00 strike price for $0.09, for a net premium paid of $0.35. The strike price paid was the $47.50. Therefore, $47.50 - $0.35 = $47.15. The trader will breakeven, excluding commissions/slippage, if the stock reaches $47.15 by expiration.

Max Profit

The breakeven point for the bear put spread is given next:

To illustrate, the trader purchased the $47.50 strike price put option for $0.44, but also sold the $45.00 strike price for $0.09, for a net premium paid of $0.35. The strike price paid was the $47.50. Therefore, $47.50 - $0.35 = $47.15. The trader will breakeven, excluding commissions/slippage, if the stock reaches $47.15 by expiration.

Partial Profit

Partial profit is calculated via the following, assuming the stock price is greater than the breakeven price:

For instance, the stock closed at $46.00 at expiration. Hence, the breakeven stock price ($47.15) minus the stock price at expiration ($46.00) would mean the trader profited $115 [($47.15 - $46.00) x 100 shares/contract]

Partial Loss

A partial loss occurs between the breakeven stock price and the upper purchased put strike price. The calculation is given next:

For example, a closing stock price at expiration of $47.40 is between the upper put strike price of $47.50 and the breakeven of $47.15 and is therefore going to be a partial loss. When calculated, the loss is $25 [($47.40 - $47.15) x 100 shares/contract].

Complete Loss

A complete loss occurs anywhere above the upper purchased put strike price ($47.50) which amounts to the entire premium paid of $35.

Next Page - Bear Put Spread vs Buying a Put