Learn bear put spread

5.4.4 · Stock-Market › Options Strategies

YEH HAI KYA?

Higher strike kyun khareedein aur lower kyun bechein?

• Higher-strike put wahi hai jo actually paisa banata hai jab price girti hai — yeh tumhara engine hai.
• Lower-strike put becha jaata hai premium collect karne ke liye, jo tumhari cost reduce karta hai. Lekin yeh $K_L$ se neeche ke saare gains bhi chhin leta hai, kyunki agar stock bahut crash kare, toh lower put ka khariddar tumhare kharche par profit karta hai, tumhara extra gain cancel ho jaata hai.

PAYOFF KAISE BANATE HAIN — First Principles Se

Expiry par long put ki value, strike $K$ aur stock price $S_T$ ke saath, uski intrinsic value hoti hai: $\text{Long put}=\max (K-S_T,0)$

Short put (jo tumne becha) bas iska negative hota hai: $\text{Short put}=-\max (K-S_T,0)$

Yeh kyun? Ek put apne holder ko $K$ par bechne deta hai. Agar $S_T<K$ ho, toh woh high par bechta hai (worth $K-S_T$); agar $S_T\ge K$ ho toh worthless hai. Seller ka mirror-image obligation hota hai.

Dono legs jodo (buy $K_H$, sell $K_L$) aur net debit $D$ jo tumne pehle diya tha, subtract karo:

$\boxed{\text{Payoff}=\underset{\text{long put}}{\underbrace{\max (K_H-S_T,0)}}-\underset{\text{short put}}{\underbrace{\max (K_L-S_T,0)}}-D}$

Ab $S_T$ ke teen regions evaluate karo (yeh derivation hai — ek baar khud karo):

Region 1: $S_T\ge K_H$ (price high, dono strikes se upar) Dono puts worthless expire hoti hain. $\text{Payoff}=0-0-D=-D\text{(tum debit kho dete ho — MAX LOSS)}$

Region 2: $K_L\le S_T<K_H$ (strikes ke beech mein) Long put in the money hai, short put abhi bhi worthless hai. $\text{Payoff}=(K_H-S_T)-0-D=(K_H-D)-S_T$ Ek neeche slope karta line: $S_T$ girne par profit badhta hai.

Region 3: $S_T<K_L$ (price dono strikes se neeche) Dono puts in the money hain. $\text{Payoff}=(K_H-S_T)-(K_L-S_T)-D=(K_H-K_L)-D\text{(MAX PROFIT, flat)}$ $-S_T$ terms cancel ho jaate hain — isliye profit $K_L$ se neeche cap ho jaata hai.

Key Numbers (sab derived hain, sirf dump nahi kiye)

Worked Examples

Common Mistakes (steel-manned)

Kab Use Karein (80/20)

Flashcards

Connections

• Long Put — is strategy ka single-leg engine.
• Bull Put Spread — credit-spread cousin (mirror logic).
• Bear Call Spread — ek aur bearish, lekin credit, structure.
• Debit vs Credit Spreads — cost/risk classification.
• Option Payoff at Expiry — $\max (K-S_T,0)$ building block.
• Breakeven Analysis in Options
• Vertical Spreads — woh family jisme yeh belong karta hai.

Concept Map