10 Bearish Option Setups That Just Triggered (March 9 Screener)

With markets in crisis, 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 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 Nvidia (NVDA).

NVDA Bear Put Spread Example

Using the May 15 expiry, this trade involves buying the $195 put and selling the $190 put.

The price for the trade is $3.35 which means the trader would pay $335 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:

5 – 3.35 x 100 = $165.

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 $191.65.

Let’s look at another example. This time on Palantir (PLTR).

Palantir Bear Put Spread Example

The first Palantir bear put spread is also using the May 15 expiry and involves buying the $170 trike put and selling the $165 strike put.

The cost of the trade is $320 which is also the maximum loss with the maximum possible gain being $180. The maximum gain would occur if Palantir stays below $170 on the expiration date.

Let’s look at another example, this time on Oracle (ORCL).

Oracle Bear Put Spread Example

The Oracle trade is also using the May 15 expiry and involves buying the $165 strike put and selling the $160 strike put.

The cost of the trade is $350 which is also the maximum loss with the maximum possible gain being $150. The maximum gain would occur if AVGO stock stays below $165 on the expiration date.

Mitigating Risk

Thankfully, bear put spreads are risk defined trades, so they have some build in risk management. 

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.