Name: Bear Put Spread or Vertical Spread
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 strike
Break-Even: The long strike – 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 call and the passing of time helps the short call
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 call then you want implied volatility to decrease. If the underlying is near the long call then you want the implied volatility to increase.
Notes: None at this time
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