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Long Put Vs Bear Put Spread Options Trading Strategy Comparison

Compare Long Put and Bear Put Spread options trading strategies. Find similarities and differences between Long Put and Bear Put Spread strategies. Find the best options trading strategy for your trading needs.

Long Put Vs Bear Put Spread

  Long Put Bear Put Spread
Long Put Logo Bear Put Spread Logo
About Strategy A Long Put strategy is a basic strategy with the Bearish market view. Long Put is the opposite of Long Call. Here you are trying to take a position to benefit from the fall in the price of the underlying asset. The risk is limited to premium while rewards are unlimited. Long put strategy is similar to short selling a stock. This strategy has many advantages over short selling. This includes the maximum risk is the premium paid and lower investment. The challenge with this strategy is that options have an expiry, unlike stocks which you can hold as long as you want. Let's assume you are bearish on NIFTY and expects its price to fall. You can deploy a Long Put strategy by buying an ATM PUT Option of NIFTY. If the price of NIFTY share... Read More 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
Market View Bearish Bearish
Strategy Level Beginners Advance
Options Type Put Put
Number of Positions 1 2
Risk Profile Limited Limited
Reward Profile Unlimited Limited
Breakeven Point Strike Price of Long Put - Premium Paid Strike Price of Long Put - Net Premium

When and how to use Long Put and Bear Put Spread?

  Long Put Bear Put Spread
When to use?

A long put option strategy works well when you're expecting the underlying asset to sharply decline or be volatile in near future.

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.

Market View Bearish

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

Bearish

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

Action
  • Buy Put Option

Let's assume you're Bearish on Nifty currently trading at 10,400. You expect it to fall to 10,000 level. You buy a Put option with a strike price 10,000. If the Nifty goes below 10,000, you will make a profit on exercising the option. In case the Nifty rises contrary to expectation, you will incur a maximum loss of the premium.

  • Buy ITM Put Option
  • Sell OTM Put Option

Breakeven Point Strike Price of Long Put - Premium Paid

The breakeven is achieved when the strike price of the Put Option is equal to the premium paid.

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.

Compare Risks and Rewards (Long Put Vs Bear Put Spread)

  Long Put Bear Put Spread
Risks Limited

The risk for this strategy is limited to the premium paid for the Put Option. Maximum loss will happen when price of underlying is greater than strike price of the Put option.

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.

Rewards Unlimited

This strategy has the potential to earn unlimited profit. The profit will depend on how low the price of the underlying drops.

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.

Maximum Profit Scenario

Underlying goes down and Option exercised

  • Maximum Profit = Unlimited
  • Maximum Profit Achieved When Price of Underlying = 0
  • Profit = Strike Price of Long Put - Premium Paid

Underlying goes down and both options exercised

Maximum Loss Scenario

Underlying goes up and Option not exercised

  • Max Loss = Premium Paid + Commissions Paid
  • Max Loss Occurs When Price of Underlying >= Strike Price of Long Put

Underlying goes up and both options not exercised

Pros & Cons or Long Put and Bear Put Spread

  Long Put Bear Put Spread
Advantages

Unlimited profit potential with risk only limited to loss of premium.

Risk is limited. It reduces the cost of investment.

Disadvantage

You may incur 100% loss in premium if the underlying price rises.

The profit is limited.

Simillar Strategies Protective Call, Short Put, Long Straddle Bear Call Spread, Bull Call Spread