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Calculate a bearish put debit spread13 minute read
Bear put spread max profit, loss, and break-even
Calculate bear put spread maximum profit, maximum loss, expiration break-even, contract multiplier, costs, and short-put assignment scenarios.
Prepared by Mark · Primary sources below
Direct answer
A bear put spread buys a higher-strike put K2 and sells a lower-strike put K1 with one expiration, where K1 < K2. Let D be the entry net debit per share before costs. Maximum expiration loss is D. Maximum profit is K2 - K1 - D. Break-even is K2 - D. Multiply by the contract multiplier and spread count, then account for trading, exercise, and assignment costs.
Measure the debit from the combined fill
The long higher-strike put costs more than the premium received for the lower short put, creating a net debit. Use the actual package fill because separate last prices may not have traded together.
If the 100 put costs 5.20 and the 95 put is sold for 2.00, D is 3.20 per share. One standard spread therefore commits 320 before costs.
The lower strike fixes the payoff ceiling
At or below K1 at expiration, both puts are in the money. Their intrinsic-value difference is the strike width, so a further stock decline does not increase the spread's terminal value.
With K2 = 100, K1 = 95, and D = 3.20, maximum profit is 5.00 - 3.20 = 1.80 per share, or 180 for one standard spread before costs.
Break-even sits below the long-put strike
At or above K2, both puts can expire worthless and maximum loss equals the 3.20 debit. Between the strikes, P&L equals K2 minus stock price minus D.
Setting that result to zero gives 96.80. A finish below 96.80 is profitable before costs, while a finish between 96.80 and 100 loses part of the debit.
Compare dollars, return, and required move
For N spreads and multiplier M, maximum profit is (K2 - K1 - D) × M × N; maximum loss is D × M × N. Costs lower the first and increase the second.
Moving the short put lower can enlarge the payoff width but normally reduces premium received. A larger quoted maximum profit may require a much larger and less likely downside move.
Expiration formulas do not price an early exit
Before expiration, time value, IV, downside skew, rates, dividends, and two bid-ask spreads determine liquidation value. The position may not track the final payoff line dollar for dollar.
The short put can be assigned early, producing long shares while the long higher-strike put remains. Near the short strike at expiration, uncertain assignment can also create unwanted weekend stock exposure.
Common questions
What is the bear put spread maximum-profit formula?
Take the higher long-put strike minus the lower short-put strike, then subtract the net debit paid per share. Multiply by the contract multiplier and number of spreads and subtract costs. The gross maximum occurs when the underlying finishes at or below the lower strike at expiration, where the intrinsic spread reaches its full width.
Is the debit always the most a bear put spread can lose?
For a matched one-to-one spread held to expiration, the option payoff cannot lose more than the original net debit. The account can still incur commissions, exercise or assignment charges, financing, and temporary stock exposure after early assignment. A quantity error or manually separated legs can also destroy the intended limit, so verify the actual position.
How do I calculate bear put spread break-even?
Subtract the per-share net debit from the higher strike of the long put. Between the strikes at expiration, the long put's intrinsic value is K2 minus stock price and the short put has no intrinsic value, so the debit is recovered at K2 - D. Before expiration there is no single fixed break-even because remaining time value and IV affect both legs.
Is a cheaper bear put spread automatically better?
No. Lower cost can result from moving both strikes farther out of the money, narrowing the width, shortening time, or selling a put that caps gains sooner. Those choices change delta, required move, probability, liquidity, and maximum dollars. Compare the debit with the payoff width and a realistic distribution of expiration outcomes rather than ranking entry cost alone.
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