Chapter 22: Basic Put Spreads 331 
TABLE 22-1. 
Put bear spread. 
XYZ Price at January 50 January 60 Total 
Expiration Put Profit Put Profit Profit 
40 -$800 +$1,300 +$500 
45 - 300 + 800 + 500 
50 + 200 + 300 + 500 
55 + 200 200 0 
60 + 200 700 - 500 
70 + 200 700 - 500 
80 + 200 700 - 500 
FIGURE 22-1. 
Put bear spread. 
Stock Price at Expiration 
Beside this difference in the probability of early exercise, the put bear spread 
holds another advantage over the call bear spread. In the put spread, if the underly­
ing stock drops quickly, thereby making both options in-the-rrwney, the spread will 
normally widen quickly as well. This is because, as has been mentioned previously, 
put options tend to lose time value premium rather quickly when they go into-the­
money. In the example above, if XYZ rapidly dropped to 48, the January 60 put would 
be near 12, retaining very little time premium. However, the January 50 put that is 
short would also not retain much time value premium, perhaps selling at 4 points or