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Bear Put Spread Vs Covered Put (Married Put) Options Trading Strategy Comparison

Compare Bear Put Spread and Covered Put (Married Put) options trading strategies. Find similarities and differences between Bear Put Spread and Covered Put (Married Put) strategies. Find the best options trading strategy for your trading needs.

Bear Put Spread Vs Covered Put (Married Put)

  Bear Put Spread Covered Put (Married Put)
Bear Put Spread Logo Covered Put (Married Put) Logo
About Strategy The Bear Put strategy involves selling a Put Option while simultaneously buying a Put option. Contrary to Bear Call Spread, here you pay the higher premium and receive the lower premium. So there is a net debit in premium. Your risk is capped at the difference in premiums while your profit will be limited to the difference in strike prices of Put Option minus net premiums. This strategy is used when the trader believes that the price of underlying asset will go down moderately. This strategy is also known as the bear put debit spread as a net debit is taken upon entering the trade. This strategy has a limited risk as well as limited rewards. How to use the bear put spread options strategy? The bear put spread strategy looks like... Read More The Covered Put is a neutral to bearish market view and expects the price of the underlying to remain range bound or go down. In this strategy, while shorting shares (or futures), you also sell a Put Option (ATM or slight OTM) to cover for any unexpected rise in the price of the shares. This strategy is also known as Married Put strategy or writing covered put strategy. The risk is unlimited while the reward is limited in this strategy. How to use a Protective Call trading strategy? The usual Covered Put looks like as below for State Bank of India (SBI) Shares which are currently traded at Rs 275 (SBI Spot Price): Covered Put Orders - SBI Stock OrdersSBI Strike Price Sell Underlying SharesSell 100 SBI Shares ... Read More
Market View Bearish Bearish
Strategy Level Advance Advance
Options Type Put Put + Underlying
Number of Positions 2 2
Risk Profile Limited Unlimited
Reward Profile Limited Limited
Breakeven Point Strike Price of Long Put - Net Premium Futures Price + Premium Received

When and how to use Bear Put Spread and Covered Put (Married Put)?

  Bear Put Spread Covered Put (Married Put)
When to use?

The bear call spread options strategy is used when you are bearish in market view. The strategy minimizes your risk in the event of prime movements going against your expectations.

The Covered Put works well when the market is moderately Bearish

Market View Bearish

When you are expecting the price of the underlying to moderately drop.

Bearish

When you are expecting a moderate drop in the price and volatility of the underlying.

Action
  • Buy ITM Put Option
  • Sell OTM Put Option

Sell Underlying Sell OTM Put Option

Suppose SBI is trading at 300. You believe that the price will remain range bound or mildly drop. The covered put allows you to benefit from this market view. In this strategy, you sell the underlying and also sell a Put Option of the underlying and receive the premium. You will benefit from drop in prices of SBI, the Put Option will minimize your risks. If there is no change in price then you keep the premium received as profit.

Breakeven Point Strike Price of Long Put - Net Premium

The breakeven point is achieved when the price of the underlying is equal to strike price of long Put minus net premium.

Futures Price + Premium Received

The break-even point is achieved when the price of the underlying is equal to the total of the sale price of underlying and premium received.

Compare Risks and Rewards (Bear Put Spread Vs Covered Put (Married Put))

  Bear Put Spread Covered Put (Married Put)
Risks Limited

The maximum loss is limited to net premium paid. It occurs when the price of the underlying is less than strike price of long Put..

Max Loss = Net Premium Paid.

Unlimited

The Maximum Loss is Unlimited as the price of the underlying can theoretically go up to any extent.

Loss = Price of Underlying - Sale Price of Underlying - Premium Received

Rewards Limited

The maximum profit is achieved when the strike price of short Put is greater than the price of the underlying..

Max Profit = Strike Price of Long Put - Strike Price of Short Put - Net Premium Paid.

Limited

The maximum profit is limited to the premiums received. The profit happens when the price of the underlying moves above strike price of Short Put.

Maximum Profit Scenario

Underlying goes down and both options exercised

Underlying goes down and Options exercised

Maximum Loss Scenario

Underlying goes up and both options not exercised

Underlying goes up and Options exercised

Pros & Cons or Bear Put Spread and Covered Put (Married Put)

  Bear Put Spread Covered Put (Married Put)
Advantages

Risk is limited. It reduces the cost of investment.

Its an income generation strategy in a neutral or Bearish market. Also allows you to benefit from fall in prices, range bound movements or mild increase.

Disadvantage

The profit is limited.

The risks can be huge if the prices increases steeply.

Simillar Strategies Bear Call Spread, Bull Call Spread Bear Put Spread, Bear Call Spread