Bear Spread

Definition

(1) A strategy involving the simultaneous purchase and sale of options of the same class and expiration date, but different strike prices.

In a bear spread, the option that is purchased has a lower delta than the option that is bought.

For example, in a call bear spread, the purchased option has a higher exercise price than the option that is sold.

Also called Bear Vertical Spread.

(2) The simultaneous purchase and sale of two futures contracts in the same or related commodities with the intention of profiting from a decline in prices but at the same time limiting the potential loss if this expectation does not materialize.

In agricultural products, this is accomplished by selling a nearby delivery and buying a deferred delivery

Related Terms

Other terms related to 'Bear Spread' starting with the letter 'B'

Basis Grade, Bear Vertical Spread, Black Scholes Model, Boiler Room, Broad Based Security Index

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