Name: Bear Put Spread or Vertical Spread
Description: The bear put spread has the same intent as the long put. However, instead of just buying the long put you also short a put. This short put reduces your cost, reduces your risk, but also reduces your profit potential.
Setup: Buy (long) Strike A put and Sell (short) Strike B put - same expiration month for both
Bias: Bearish with a target at the short strikeBreak-Even: Strike B - debit paid
Max Profit: Limited: Strike A - Strike B - Debit Paid
Max Loss: Limited: Debit paid
Margin: No margin required
Time Decay: A neutral effect - the passing of time hurts the long put and the passing of time helps the short put
Implied Volatility: The effect of implied volatility depends on where the underlying is in relation to the strikes. If the underlying is trading near the short put then you want implied volatility to decrease. If the underlying is near the long put then you want the implied volatility to increase.
Notes: None at this time
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