Bear Put Spread Screener Results For January 11th

A bear put spread is a vertical spread that aims to profit from a stock declining in price. It has a bearish directional bias as hinted in the name. Unlike the bear call spread, it suffers from time decay so traders need to be correct on the direction of the underlying and also the timing.

A bear put spread is created through buying an out-of-the-money put and selling a further out-of-the-money put.

The maximum profit is equal to the distance between the strikes, less the premium paid. The loss is limited to the premium paid.

Let’s take a look at Barchart’s Short Bear Put Spread Screener for today:

Some interesting trades here with impressive Max Profit Percentage. Let’s take a look at the second item in the table – a bear put spread on Microsoft (MSFT).

Microsoft Bear Put Spread Example

Using the March 17 expiry, this trade involves buying the 230 put and selling the 175 put.

The price for the trade is $11.34 which means the trader would pay $1,134 to enter the trade. This is also the maximum loss. The maximum gain be calculated by taking the width between the strikes and subtracting the premium paid:

55 – 11.34 x 100 = $4,366.

The breakeven price for the trade is equal to the long put strike, less the premium. In this case, that gives us a breakeven price of 218.66.

Let’s strengthen our bearish screener by adding a parameter for any stock with a Sell rating greater than 49%. Here are the results:

Lots of tech names here including Alphabet (GOOGL), Apple (AAPL) and Amazon (AMZN).

Let’s look at the first GOOGL example.

Alphabet Bear Put Spread Example

The fourth line item on GOOGL stock is also using the March expiry and involves buying the 89 strike put and selling the 70 strike put.

The cost of the trade is $477 which is also the maximum loss with the maximum possible gain being $1,423. The maximum gain would occur if GOOGL stock fell below 70 on the expiration date.

The Barchart Technical Opinion rating is a 100% Sell with a weakening short term outlook on maintaining the current direction. Long term indicators fully support a continuation of the trend.

GOOGL is showing an IV Percentile of 80% and an IV Rank of 66%. The current level of implied volatility is 41.18% compared to a 52-week high of 49.18% and a low of 25.69%.

Of the 34 Analysts following GOOGL there are 29 Strong Buy, 4 Moderate Buy and 1 Hold recommendations.

Let’s look at another example, this time on Apple.

Apple Bear Put Spread Example

The first Apple example is using the March 17 expiry and involves buying the 135 strike put and selling the 105 strike put.

The cost of the trade is $832 which is also the maximum loss with the maximum possible gain being $2,168. The maximum gain would occur if AAPL stock fell below 105 on the expiration date.

The Barchart Technical Opinion rating is an 100% Sell with a strengthening short term outlook on maintaining the current direction. Long term indicators fully support a continuation of the trend.

AAPL is showing an IV Percentile of 76% and an IV Rank of 66%. The current level of implied volatility is 37.47% compared to a 52-week high of 44.98% and a low of 22.49%.

Of the 17 Analysts following AAPL there are 17 Strong Buy, 2 Moderate Buy and 4 Hold recommendations.

Mitigating Risk

Thankfully, bear put spreads are risk defined trades, so they have some build in risk management. The most the GOOGL example can lose is $477 while the AAPL trade has risk of $832.

For each trade consider setting a stop loss of 30% of the max loss.

Please remember that options are risky, and investors can lose 100% of their investment. 

This article is for education purposes only and not a trade recommendation. Remember to always do your own due diligence and consult your financial advisor before making any investment decisions.

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