Choose long and short put strikes using the downside target, delta, debit, breakeven, width and probability profile.
Place the long strike
An ITM long put usually has more negative delta and costs more. An OTM long put is cheaper but needs a larger decline. Compare breakeven and probability rather than premium alone.
Place the short strike
The short put often sits near the forecast target. Moving it lower expands possible profit but collects less premium; moving it higher lowers cost while capping the trade sooner.
Choose the width
Wider spreads offer more maximum value but normally require more debit. Narrow spreads can be dominated by commissions and bid-ask costs, especially when the expected move is uncertain.
Check liquidity and skew
Evaluate executable prices, open interest and bid-ask width for both puts. Downside skew may make the lower-strike short put comparatively rich, materially changing the economics.
A practical example
With stock at $103 and a $92 target, compare 100/95, 100/90 and 95/90 spreads. Each produces different debit, breakeven and maximum reward.
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
Should the short strike equal the target?
It is a useful starting point, not a rule.
Is an ITM spread safer?
It may need a smaller decline, but the larger debit remains at risk.
Why check skew?
Put implied volatility often differs substantially across strikes.
Continue the Bear Put Spreads cluster
Explore related guides: How to Choose a Bear Put Spread Expiration · Bear Put Spread Greeks: Delta, Gamma, Theta and Vega · Bear Put Spread: 12 Mistakes to Avoid. 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.