Chapter 06 · Section 6.1

Bearish Put Spread Strategies

A vertical put spread is the simultaneous purchase and sale of identical put options but with different exercise prices.

To "buy a put spread" is to purchase a put with a higher exercise price and to write a put with a lower exercise price. The trader pays a net premium for the position.

To "sell a put spread" is the opposite: the trader buys a put with a lower exercise price and writes a put with a higher exercise price, receiving a net premium for the position.