Walk through one bear put spread across expiration prices above the long strike, between the strikes and below the short strike.
Set up the example
Assume shares trade at $100. Buy the 100 put for $5.40 and sell the 90 put for $1.90. The net debit is $3.50, or $350 for one standard spread.
Above the long strike
At $100 or higher at expiration, both puts have no intrinsic value and the debit is lost. Between $100 and $96.50, the long put gains value but not enough to recover the debit.
Between the strikes
At $94, the long put is worth $6 while the short put remains worthless. The spread is worth $600 and produces a $250 expiration profit after the initial debit.
Below the short strike
At $90 or lower, the two puts together are worth the full $10 strike width. Maximum expiration profit is $650; a further stock decline cannot add intrinsic spread value.
A practical example
At expiration prices of $105, $96.50, $94 and $80, approximate P&L is −$350, $0, +$250 and +$650 before costs.
This simplified example focuses on the spread at a specific moment and expiration outcome. Live option prices also reflect the underlying price, time decay, rates, dividends, liquidity and transaction costs. Greeks are theoretical estimates, not guarantees.
Frequently asked questions
What happens at $95?
The spread is worth $5 at expiration, producing $150 after the $3.50 debit.
Why is profit capped below $90?
Additional long-put gains are offset by the short put.
Can it be closed early?
Yes, through a closing multi-leg order.
Continue the Bear Put Spreads cluster
Explore related guides: How to Choose Bear Put Spread Strikes · Bear Put Spread vs Protective Put · How to Adjust a Bear Put Spread. For a structured sequence, use the free Level 10 – Bear Put Spread course.
Options involve risk and are not suitable for every investor. This material is educational and is not investment, tax or legal advice. Greeks are theoretical estimates, and contract terms and broker requirements can vary.