How Do You Buy A Put Or Bear Spread?
If you think a stock or index is about to go down, but you don’t want a lot of risk, then putting on bear or put spread using options may be your best bet to capitalize on this move. Step 1 Once you have determine that a stock or index is about to go down, you should next figure how long it will it take before this move will occur. You can establish a bear spread from a month to a year depending on your speculation. Remember that the longer term options often have wider spreads (bid/ask), thus it will be more expensive to purchase the longer term bear spread versus shorter term expiration spreads. Step 2 After determining that your particular stock is about to go down during a specific amount of time, your next step will be to determine what strikes you want to buy and which you want to sell. Typically, it is best to purchase (debit) the put strike that is slightly in the money (itm) and sell (credit) the lower put strike that is out of the money (otm). For example, if the stock is at
