# Bear Put Spread Profit, Loss, & Breakeven

1. Bear Put Spread Option Strategy
2. Bear Put Spread Profit, Loss, & Breakeven

The following is the profit/loss graph at expiration for the Bear Put Spread in the example given on the previous page.

## Break-even

The breakeven point for the bear put spread is given next:

• Breakeven Stock Price = Purchased Put Option Strike Price - Net Premium Paid (Premium Paid - Premium Sold).

To illustrate, the trader purchased the \$47.50 strike price put option for \$0.44, but also sold the \$45.00 strike price for \$0.09, for a net premium paid of \$0.35. The strike price paid was the \$47.50. Therefore, \$47.50 - \$0.35 = \$47.15. The trader will breakeven, excluding commissions/slippage, if the stock reaches \$47.15 by expiration.

## Max Profit

The breakeven point for the bear put spread is given next:

• Breakeven Stock Price = Purchased Put Option Strike Price - Net Premium Paid (Premium Paid - Premium Sold).

To illustrate, the trader purchased the \$47.50 strike price put option for \$0.44, but also sold the \$45.00 strike price for \$0.09, for a net premium paid of \$0.35. The strike price paid was the \$47.50. Therefore, \$47.50 - \$0.35 = \$47.15. The trader will breakeven, excluding commissions/slippage, if the stock reaches \$47.15 by expiration.

## Partial Profit

Partial profit is calculated via the following, assuming the stock price is greater than the breakeven price:

• Bear Put Spread Partial Profit = Breakeven price - Stock price

For instance, the stock closed at \$46.00 at expiration. Hence, the breakeven stock price (\$47.15) minus the stock price at expiration (\$46.00) would mean the trader profited \$115 [(\$47.15 - \$46.00) x 100 shares/contract]

## Partial Loss

A partial loss occurs between the breakeven stock price and the upper purchased put strike price. The calculation is given next:

• Bear Put Spread Partial Loss = Stock price - Breakeven price

For example, a closing stock price at expiration of \$47.40 is between the upper put strike price of \$47.50 and the breakeven of \$47.15 and is therefore going to be a partial loss. When calculated, the loss is \$25 [(\$47.40 - \$47.15) x 100 shares/contract].

## Complete Loss

A complete loss occurs anywhere above the upper purchased put strike price (\$47.50) which amounts to the entire premium paid of \$35.