Futures Lookup   Quote Chart Opinion Profile Markets Futures Forex Funds Signals Sectors My Quotes Education Member Sign-In: › Subscriber Login › Member Benefits Markets Overview: › Market Indices › Exchange Funds › Market Momentum › 52 Week Highs › 52 Week Lows › Volume Leaders › Percent Advances › Percent Declines › Price Advances › Price Declines › Price Volume › Volume Advances › Highs / Lows › What's Hot › What's Not  Stock Options  Market Snapshot  Rankings  Commentary  Education  Glossary › IB Times News › Funds › Signals › Sectors Options Education Featured Sponsor:  Bear Put Spread A bear put spread is a debit spread created by purchasing a higher strike put and selling a lower strike put with the same expiration dates. This strategy is best implemented in a moderately bearish market. It provides high leverage over a limited range of stock prices. The profit on this strategy can increase by as much as 1 point for each 1-point increase in the price of the underlying. However, the total investment is usually far less than that required to buy the stock shares. The strategy has both limited profit potential and limited downside risk. Steps to Using a Bear Put Spread Look for a moderately bearish market where you anticipate a modest decrease in the price of the underlying stock-not a large move. Check to see if this stock has options. Review put options premiums by expiration dates and strike prices. Investigate implied volatility values to see if the options are overpriced or undervalued. Explore past price trends and liquidity by reviewing price and volume charts over the last year. Choose a higher strike put to buy and a lower strike put to sell with the same expiration date. Calculate the maximum potential profit by multiplying the value per point by the difference in strike prices and subtracting the net debit paid. Calculate the maximum potential risk by computing the net debit of the two option premiums. Calculate the breakeven by subtracting the net debit from the higher strike price. Create a risk profile for the trade to graphically determine the trade's attractiveness. Write down the trade in your trader's journal before placing the trade with your broker to minimize mistakes made in placing the order and to keep a record of the trade. Contact your broker to buy and sell the chosen put options. Watch the market closely as it fluctuates. The profit on this strategy is limited-a loss occurs if the underlying stock rises to or above breakeven point. To exit the trade, you need to sell the higher strike put and buy the lower strike put or simply let the options expire. The maximum profit occurs when the price of the underlying stock falls below the short put strike price. If and when the short put is exercised by the assigned option holder, you can exercise the long put to sell the shares purchased from the option holder at the higher long put price, pocketing the difference plus the premium of the short put. Back to Top    Barchart Marketplace  »» Barchart.com © Copyright 2008, Barchart.com User agreement applies. Data provided by ddfplus and subject to terms of use and privacy policy. |  Webmaster Tools  |  Advertising  |  Suggestions Box  |  About Barchart.com  |  Support  | Press Ctrl+P to print this page   Data and information is provided for informational purposes only, and is not intended for trading purposes. Neither Barchart.com Inc. nor its data provider (ddfplus) shall be liable for any errors or delays in the content, or for any actions taken in reliance thereon. By accessing the Barchart.com Inc. web site, a user agrees not to redistribute the information found therein. Press Ctrl+D to bookmark this page - Set www2.barchart.com as your Home Page All Equities and Futures data is delayed according to exchange rules. NYSE and AMEX at least 20 minutes. Nasdaq at least 15 minutes. CME and CBOT at least 10 minutes. NYBOT, NYMEX and COMEX at least 30 minutes.