Economics Options And Futures Questions
The concept of a bear spread strategy in options trading involves the simultaneous purchase and sale of options contracts with the same expiration date but different strike prices. This strategy is used by traders who anticipate a decrease in the price of the underlying asset. The bear spread strategy aims to profit from the decline in the asset's price by limiting potential losses and maximizing potential gains. It typically involves buying a lower strike price option and selling a higher strike price option, resulting in a net debit. The maximum profit is achieved if the price of the underlying asset decreases to or below the lower strike price, while the maximum loss is limited to the initial net debit paid for the options.