Bear Spread

What is Bear Spread?

Bear Spread meaning (1) A strategy involving the simultaneous purchase and sale of options of the sameclass 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 callbear 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.

 

reference: U.S. COMMODITY FUTURES TRADING COMMISSION – CFTC Glossary