Bear spread,
Definition of Bear spread:
A strategy in which a trader, expecting a downturn in the market, sells one option and purchases another in such a way as to profit from the downturn or minimize losses.
A bear spread is an options strategy implemented by an investor who is mildly bearish and wants to maximize profit while minimizing losses. The goal is to net the investor a profit when the price of the underlying security declines. The strategy involves the simultaneous purchase and sale of either puts or calls for the same underlying contract with the same expiration date but at different strike prices.
Options strategy in which a near-month futures contract is sold and a corresponding farther-month futures contract is bought to profit from an anticipated drop in the price of the underlying item.
The main impetus for an investor to execute a bear spread is that they expect a decline in the underlying security, but not in an appreciable way, and want to either profit from it or protect their existing position. The opposite of a bear spread is a bull spread, which is utilized by investors expecting moderate increases in the underlying security. There are two types of bear spreads that a trader can initiate - bear put spread and bear call spread. Both are classified as vertical spreads.
How to use Bear spread in a sentence?
- There are two types of bear spreads that a trader can initiate - bear put spread and bear call spread.
- The strategy involves the simultaneous purchase and sale of either puts or calls for the same underlying contract with the same expiration date but at different strike prices.
- A bear spread is an options strategy implemented by an investor who is mildly bearish and wants to maximize profit while minimizing losses.
Meaning of Bear spread & Bear spread Definition