Bear spread

This strategy can be implemented using either call options or put options.

Using calls, the strategy is a short position in a call with a strike price of X1 combined with a long position in a call with a strike price of X2, where X1 is less than X2. A bull spread created with puts involves a positive cash flow up front and future payoff that is either negative or zero.

Using puts, the strategy is a short position in a put with strike price X1 combined with a long position in a put with strike price X2, where X1 is less than X2. A bull spread created from puts requires an initial investment.

Upside potential and downside risk are both limited.