Use options to make a profit on declining stock

A bear spread is also called a put spread. You consider investing in a bear spread if you think that the stock you are interested will go down in value, but you do not want to just purchase a short put. However, it is difficult to put the bear spread into effect if you do not have enough market experience. Therefore, if you are going to do any of this investing, make sure that you get a broker to do it for you.

The bear spread also involves the movement of more than one call or put option. The most common way to put this strategy into effect is to purchase a put that has a high strike price and to sell a put with a low strike price – make sure that both of these options have the same expiration date, or the strategy will not work correctly.

One example of how this could be used is actually in the agricultural futures market. It is common in that market to make money by selling one future and then purchasing another one that will have a long-term delivery date. This means that you will still be able to make money – and you won’t have to worry about the current low future prices since you won’t have to exercise your future while the prices are down.

With the bear spread, the chances that you will make or lose money are limited. This is good if you are not sure that the market will go the way that you want it to. Overall, this is a fairly safe strategy for times in which the market is declining.

The reason that the return is limited is that your maximum return is dependent on the amount of money that you sold your option for. Similarly, the your risk is also limited by the amount of money that you paid to get the new option with the higher strike price.

Even though the most common example of a bear spread is done with put options, you can also use this strategy for trading call options. The most important thing to remember is that the bear spread is a safe strategy for situations in which the stock market is expected to fall.