# Bear Put Spread - Advanced Options Strategies

> Disclosure: This article explains how Options on MegaFi work and is intended for educational purposes only. It is not financial advice or a product promotion.

**Published by:** [MegaFi](https://paragraph.com/@megafi/)
**Published on:** 2026-01-06
**URL:** https://paragraph.com/@megafi/bear-put-spread-advanced-options-strategies

## Content

What Is a Bear Put Spread? 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 How Bear Put Spread Works The Setup 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. Example Setup 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. Profit & Loss Scenarios Scenario 1: ETH Rises Above $3,000 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 Scenario 2: ETH Stays Between Strikes 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 Scenario 3: ETH Hits Lower Strike ($2,800) 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 Scenario 4: ETH Falls Below Lower Strike 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 Key Metrics Maximum Profit Formula: (Higher strike - Lower strike) × Size - Net premium Example: ($3,000 - $2,800) × 10 - $300 = $1,700 Achieved when: ETH ≤ lower strike at expiration Maximum Loss Formula: Net premium paid Example: $300 Occurs when: ETH ≥ higher strike at expiration Break-Even Price Formula: Higher strike - (Net premium ÷ Size) Example: $3,000 - ($300 ÷ 10) = $2,970 Profit zone: ETH below $2,970 at expiration Profit Range Maximum profit: ETH ≤ $2,800 Partial profit: ETH between $2,800 and $2,970 Loss: ETH ≥ $2,970 Bear Put Spread vs Single Put Cost Comparison 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% Profit Comparison 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 When to Use Bear Put Spread Ideal Conditions 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 Not Ideal For 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 Real-World Example: Protecting LP Position 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 Execution on Hedge 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. Risk Management Defined Risk Maximum loss = net premium paid ($300) No liquidation risk No margin calls Collateral is locked, not at risk of liquidation Profit Cap Maximum profit = strike difference minus net premium Understand the trade-off: lower cost, capped profit Time Decay Both options decay as expiration approaches Monitor time value remaining Early Exercise 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 Management 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) Summary 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.

## Publication Information

- [MegaFi](https://paragraph.com/@megafi/): Publication homepage
- [All Posts](https://paragraph.com/@megafi/): More posts from this publication
- [RSS Feed](https://api.paragraph.com/blogs/rss/@megafi): Subscribe to updates