Bear Put Spread on CSR

By Karo Cornips | More Articles by Karo Cornips

Most traders can profit from a falling market.

But there is a way, where you can profit from not only bearish movement, but also sidewards movement.

The Bear Put spread, if applied properly will profit from not only time decay but any bearish movement.

So what is a Bear Put Spread?

The Bear Put spread, as the name describes, is a bearish trade. If applied properly, it can also profit from sidewards movement and time decay.

So when would we use one?

If a stock looks bearish, a Bear Put, can be used to profit from the downward movement.

If the stock seems likely to go sidewards or drift slowly down, you can make maximum profit without needing much of a fall.

Let’s run through an example.

The chart below is of CSR, which is trading at $4.35.

CSR is trading in a longer term up trend, but has recently retraced from its highs of $4.60 to form a short term downtrend. It seemed to consolidate recently along with the rest of the market, but has fallen strongly today. It is likely CSR is heading back towards trend.

The Bear Put spread is appropriate because we can take advantage of bearish movement, as well as any sidewards movement that might occur if CSR drifts down slowly.