Bear Put Spread Screener Results For March 10th

With markets taking a bearish turn, it’s a good time to check in on our bear put spread screener.

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 first item in the table – a bear put spread on Bank of America (BAC).

Bank of America Bear Put Spread Example

Using the May 19 expiry, this trade involves buying the 31 put and selling the 20 put.

The price for the trade is $1.82 which means the trader would pay $182 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:

11 – 1.82 x 100 = $918.

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 29.18.

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

Let’s look at the first example on Pfizer (PFE).

PFE Bear Put Spread Example

The first line item on PFE stock is using the June expiry and involves buying the 40 strike put and selling the 27.50 strike put.

The cost of the trade is $220 which is also the maximum loss with the maximum possible gain being $1,030. The maximum gain would occur if PFE stock fell below 27.50 on the expiration date.

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

PFE is showing an IV Percentile of 18% and an IV Rank of 20.10%. The current level of implied volatility is 24.75% compared to a 52-week high of 38.77% and a low of 21.22%.

Of the 15 Analysts following PFE there are 6 Strong Buy and 9 Hold recommendations.

Let’s look at another example, this time on Amazon (AMZN).

AMZN Bear Put Spread Example

The AMZN example is using the May 19 expiry and involves buying the 95 strike put and selling the 70 strike put.

The cost of the trade is $704 which is also the maximum loss with the maximum possible gain being $1,796. The maximum gain would occur if AMZN stock fell below 70 on the expiration date.

The Barchart Technical Opinion rating is an 88% Sell with a strongest short term outlook on maintaining the current direction. Long term indicators fully support a continuation of the trend.

AMZN is showing an IV Percentile of 22% and an IV Rank of 29.32%. The current level of implied volatility is 38.23% compared to a 52-week high of 61.20% and a low of 28.70%.

Of the 40 Analysts following AMZN there are 33 Strong Buy, 5 Moderate Buy, 1 Hold and 1 Strong Sell ratings.

Mitigating Risk

Thankfully, bear put spreads are risk defined trades, so they have some build in risk management. The most the PFE example can lose is $220 while the AMZN trade has risk of $704.

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

If you have any questions, feel free to reach out to me by email or on Twitter. 

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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