Bear Spread | PFG Futures

Bear Spread

Class: Directional

Short call A, long call B Short put A, long put B Short call A, long put B, long instrument

Short put A, long call B ,short instrument


When to use:

If you think the market will fall somewhat or at least is a

bit more likely to fall than rise. The most popular position

among bears because it may be entered as a conservative

trade when uncertain about bearish stance.

Profit Characteristics:

Profit limited, reaching maximum if market at expiration

if market is at or below A. If put-vs.-put version (most

common) used, break-even is at B – net cost of spread.

Loss Characteristics:

By accepting limit to profits, you gain a limited to risk. Losses,

at expiration, increase as market rises to B, where they stabilize.

With put-vs.-put version, maximum loss is net cost of spread.

Decay Characteristics:

If market is midway between A and B, no time effect. At A, profits

increase at fastest rate with time. At B, losses increase at

maximum rate with time.

See also  Bonds Seasonal Chart