How to use a bear spread

A bear spread is used when you feel the general market conditions are going lower. Using the same concept of a bear as used in the stock market, bear spreads are for use when you're feeling pessimistic about the economy or the direction of the market.

• The most you can lose on a bear spread is the difference between the strike price minus the credit and transaction costs
• Your maximum profit is the credit (the amount of excess profit from the short side exceeding the cost of both the long position and transaction costs
• Bear spreads profit when the spread narrows