What is the spread of the bear?

Bear range is a type of option strategy that is used with a vertical approach that includes factors such as delayed monthly futures contract and a decrease in security price. The bear span can use PUT options or call options to pass the ideal option strategy. Here are some examples of how the bear spread. The basic idea is to buy call options for a specific strike while selling the same number of call options for a strike that is lower than the price for newer purchases. For example, the shares have a current offer of shares of $ 200.00 (USD). The current price for this amount is $ 2. At the same time, it has shares held by the investor, the current offer of $ 205 with the possibility of calling $ 5. The investor decides to buy the possibility of calling on stocks $ 200, which creates a drain of $ 200. At the same time, the investor decides to sell a call that creates a rough tide of $ 500. After allowing the outflow, this means that the investor received $ 300.

Access to the spread of bears that uses call access is somewhat similar. With this strategy, emphasis is placed on use rather than calling to increase net assets. The investor buys the possibilities of PUT, which currently has a higher price of strike, and at the same time sells the same number of shares that have a lower current price that has the same month of expiry as the stock sold. In this scenario, there is a hope that the prices of the underlying stock will fall during the quoted period. If this happens, the amount of profit will be maximized from a set of transactions to achieve an increase.

Bear spread is in many cases a feasible investment strategy. However, it is also an approach that requires attention to details. The chances of incorrect step in this process are very good, especially for people who are just beginning to work with stock options. As with any type of investment strategy, it is good to runSome simulations before you actually engage in bear spread.