Bear Put Spreads Option Strategy

Option Tips Bear put option strategy is employed when the trader think the price of the underlying asset will go down moderately in the near term.
In this strategy, the trader buys an in-the-money-put-option of higher strike price and sell an out-of-money-put option of lower strike price of the same underlying security with the same expiration date.
By using this strategy the options trader reduces the cost of establishing the bearish position.
By shorting the out-of-the-money put, the options trader reduces the cost of establishing the bearish position but forgoes the chance of making a large profit in the event that the underlying asset price plummets.
To reach the maximum profit the stock price need to close below the strike price.
Max Loss= Net premium paid+commission paid
Max Loss occurs when the price of underlying >=strike price of Long put.
Break even point = Strike Price of Long Put- Net Premium Paid.