A Bear Put Spread is a bearish options strategy that reduces cost by selling a lower-strike put while buying a higher-strike put. It limits both cost and profit.
Structure:
Buy 1 higher-strike put (e.g., $3,000)
Sell 1 lower-strike put (e.g., $2,800)
Net cost = premium paid minus premium received
Why use it:
Lower cost than a single put
Defined risk (max loss = net premium)
Capped profit (max profit = strike difference minus net premium)
Good for moderate bearish views
You're moderately bearish on ETH. Instead of buying a single put, you:
Buy a higher-strike put (e.g., $3,000) — your protection
Sell a lower-strike put (e.g., $2,800) — reduces cost, caps profit
The sold put funds part of the bought put, lowering net cost.
Current ETH Price: $3,000
Bear Put Spread:
Buy: 10 ETH $3,000 put (30 days)
Premium: $60 per ETH = $600 total
Sell: 10 ETH $2,800 put (30 days)
Premium received: $30 per ETH = $300 total
Net premium cost: $600 - $300 = $300
Capital required:
Net premium: $300
Collateral for sold put: $28,000 USDm (strike × size = $2,800 × 10)
Total capital needed: $28,300 USDm
Note: The $28,000 collateral is locked until expiration or if you close the position early. It's returned if the sold put expires worthless or used for settlement if exercised against you.
ETH at $3,200:
$3,000 put expires worthless: -$600
$2,800 put expires worthless: +$300 (premium kept)
Collateral returned: $28,000
Net: -$300 (max loss)
Outcome: Maximum loss = net premium paid
ETH at $2,900:
$3,000 put profit: ($3,000 - $2,900) × 10 = $1,000
Premium paid: -$600
Net from bought put: +$400
$2,800 put expires worthless: +$300 (premium kept)
Collateral returned: $28,000
Total: $400 + $300 = $700 profit
ROI: 233%
Outcome: Profit increases as price moves toward the lower strike
ETH at $2,800:
$3,000 put profit: ($3,000 - $2,800) × 10 = $2,000
Premium paid: -$600
Net from bought put: +$1,400
$2,800 put at strike: $0 (no profit/loss)
Premium received: +$300
Collateral returned: $28,000
Total: $1,400 + $300 = $1,700 profit
ROI: 567% (max profit)
Outcome: Maximum profit achieved
ETH at $2,600:
$3,000 put profit: ($3,000 - $2,600) × 10 = $4,000
Premium paid: -$600
Net from bought put: +$3,400
$2,800 put loss: ($2,800 - $2,600) × 10 = -$2,000
Premium received: +$300
Net from sold put: -$2,000 + $300 = -$1,700
Collateral used: $2,000 (from $28,000 locked)
Collateral returned: $26,000
Total: $3,400 - $1,700 = $1,700 profit
ROI: 567% (capped at max profit)
Outcome: Profit is capped at the maximum
Formula: (Higher strike - Lower strike) × Size - Net premium
Example: ($3,000 - $2,800) × 10 - $300 = $1,700
Achieved when: ETH ≤ lower strike at expiration
Formula: Net premium paid
Example: $300
Occurs when: ETH ≥ higher strike at expiration
Formula: Higher strike - (Net premium ÷ Size)
Example: $3,000 - ($300 ÷ 10) = $2,970
Profit zone: ETH below $2,970 at expiration
Maximum profit: ETH ≤ $2,800
Partial profit: ETH between $2,800 and $2,970
Loss: ETH ≥ $2,970
Single $3,000 Put:
Premium: $60 × 10 = $600
Maximum loss: $600
Bear Put Spread ($3,000/$2,800):
Net premium: $300
Collateral required: $28,000 (locked, returned if not exercised)
Maximum loss: $300
Premium cost reduction: 50%
Single $3,000 Put at $2,600:
Profit: ($3,000 - $2,600) × 10 - $600 = $3,400
ROI: 567%
Bear Put Spread at $2,600:
Profit: $1,700 (capped)
ROI: 567% (same ROI, lower absolute profit)
Trade-off: Lower premium cost and defined risk, but capped profit
Moderately bearish outlook
Expect decline, not a crash
Target price near the lower strike
Want to reduce premium cost
Lower net premium than a single put
Better capital efficiency on premium
Accept capped profit
Willing to limit upside for lower cost
Prefer defined risk/reward
Target specific price range
Expect ETH between the two strikes
Optimize for that range
Have collateral available
Can lock USDm equal to lower strike × size
Collateral is returned if not exercised
Very bearish outlook (use a single put or Strip)
Expecting a crash below the lower strike (profit is capped)
Need unlimited profit potential
Don't have collateral available
Situation: You provide liquidity to an ETH/USDm pool. ETH is at $3,000. You're concerned about a 5–10% drop.
Strategy: Bear Put Spread
Setup:
Buy: 10 ETH $3,000 put
Sell: 10 ETH $2,800 put
Net premium: $300
Collateral required: $28,000 USDm
Outcomes:
ETH drops to $2,900:
Spread profit: ~$700
IL on LP: ~$500
Net: Protected + small profit
ETH drops to $2,700:
Spread profit: $1,700 (capped)
IL on LP: ~$1,500
Net: Protected + small profit
ETH stays at $3,000:
Spread loss: $300
LP continues earning fees
Collateral returned: $28,000
Net: Small cost for protection
Result: Cost-effective downside protection with defined risk
Select "Bear Put Spread" strategy
Choose underlying (ETH)
Enter size (10 ETH)
Select strikes:
Higher strike: $3,000
Lower strike: $2,800
Choose expiration (30 days)
Review premiums:
Buy premium: $600
Sell premium: $300
Net premium: $300
Review collateral requirement:
Required: $28,000 USDm (strike × size)
This will be locked until expiration
Approve USDm for:
Net premium: $300
Collateral: $28,000
Confirm transaction
Receive position NFT
Execution time: < 10ms on MegaETH
Real-time pricing: Premiums update continuously based on Black-Scholes and Chainlink oracles
Collateral: Locked until expiration or if you close the position early. Returned if the sold put expires worthless or used for settlement if exercised.
Maximum loss = net premium paid ($300)
No liquidation risk
No margin calls
Collateral is locked, not at risk of liquidation
Maximum profit = strike difference minus net premium
Understand the trade-off: lower cost, capped profit
Both options decay as expiration approaches
Monitor time value remaining
Classic strategy: you can exercise the bought put early if ITM
Sold put: if exercised early against you, collateral is used for settlement
Net profit/loss calculated the same way regardless of when exercised
Collateral is locked when you sell the put
Returned if the sold put expires worthless
Used for settlement if the sold put is exercised against you
Can close the position early to free collateral (may require buying back the sold put)
Bear Put Spread:
Structure: Buy higher-strike put + Sell lower-strike put
Premium cost: Lower than a single put (net premium)
Collateral: Required for sold put (strike × size)
Risk: Defined (max loss = net premium)
Profit: Capped (max profit = strike difference - net premium)
Best for: Moderate bearish outlook, cost reduction, defined risk/reward
Key advantage: Lower premium cost with defined risk, suitable for moderate bearish views
Trade-off: Capped profit in exchange for lower premium cost. Requires collateral for the sold put.
Next: Bear Call Spread — Premium income strategy for neutral-to-bearish views
Disclaimer: Options trading involves risk. Examples are for educational purposes. Past performance does not guarantee future results. Always understand the risks before trading.