Course Description

Why pay full price for market protection with a Long Put? The Bear Put Spread uses a "short leg" to subsidize the cost of your "long leg." We will use our US 500 example to show how adding a $6,700 strike can lower your breakeven and protect your capital from the effects of time decay.

Module 1: Traditional Options vs. Spread Betting

IG’s "options" are actually Spread Bets based on option prices, offering a unique edge for traders in the UK and Ireland.

Tax Status: Spread betting profits are exempt from Capital Gains Tax (CGT) and Stamp Duty.
Trade Unit: You trade in $ per point (or £ per point).
The Debit Advantage: This is a "limited risk" trade. Your maximum loss is known the moment you open the position.
Currency: You can trade US markets in USD to align with the index value.

Module 2: What is a Bear Put Spread?

A Bear Put Spread is a vertical spread where you buy one put (the expensive one) and sell another put further "Out-of-the-Money" (the cheaper one).

The Goal: Profit from the US 500 falling, but with a much lower upfront cost.
The Trade-Off: In exchange for a lower cost, you agree to cap your maximum profit at the lower strike price.
Why it's smarter: It neutralizes a large portion of the Time Decay (Theta) that makes Long Puts expensive to hold.

Module 3: The US 500 Case Study (The Spread)

We are using the 7,100 long put from our previous course, but adding a second "leg" to turn it into a spread.

The Setup:

Current Market: US 500 @ $6,970
Leg 1 (Long): Buy $7,100 Put @ 210.40 pts
Leg 2 (Short): Sell $6,700 Put @ 78.43 pts (This is your "Subsidy")

The Math at $5 per point:

Net Debit (Cost): 210.40 - 78.43 = 131.97 pts
Total Max Risk: 131.97 x $5 = $659.85 (vs. $1,052.00 for the long put alone).
Maximum Value: 7,100 (Long Strike) - 6,700 (Short Strike) = 400 pts
Maximum Profit: (400 - 131.97) x $5 = $1,340.15
Breakeven: $7,100 (Long Strike) - 131.97 (Net Debit) = $6,968.03

Module 4: "What If?" Expiry Scenarios (Spread vs. Long Put)

Let’s see how the spread performs compared to the naked call at the end of the 65 days.

Scenario A: US 500 stays Flat (closes at $6,970)

Long 7100 Put: Worth 130 pts.
Short 6700 Put: Worth 0 pts (expires worthless).
Net Value: 130 pts.
Total Result: Loss of $9.85 ( (130 - 131.97) x $5 ).
Note: On the Long Put strategy alone, you lost $402.00. The spread saved you $392.15!

Scenario B: US 500 rises to $7,100+ (Wrong Direction)

Both puts expire worthless.
Total Result: Max Loss of $659.85.
Note: You saved $392.15 in total losses compared to the long put.

Scenario C: US 500 Crashes to $6,500 (The Win)

Index % Move: -6.74%
Spread Value: Reaches its max cap of 400 pts.
Net Profit: $1,340.15.
Return on Investment (ROI): 203.1%
Note: Your ROI is actually HIGHER than the Long Put (185.2%) because your entry cost was so much lower. But USD profit amount is lower because we capped our profits at the 6700 strike.

Module 5: The "Delta Compass" Workaround

IG Index won't show you the probability. For this spread:

Check External Delta: Ensure your Long Leg ($7,100) has a Delta of -0.70 or higher and your Short Leg ($6,700) has a Delta of around -0.25.
The Goal: You want a "Net Delta" that is negative, meaning the position gains value as the market falls, but with significantly less "Time Value" bleed.

Executing on the IG Platform

Navigate: Open IG, Spreadbet Account and select "Options".
Choose Instrument: Select the instrument you want to trade e.g. US 500
Choose Expiry: Select Daily, Weekly, or Monthly.
Currency Setting: Ensure your trade is set to GBP or USD.
Stake Size: IG typically has a minimum stake of £1 per point for indices. You change the stake size for your trade.
Separate Execution: Unlike traditional brokers, you cannot place a "spread order" as one package. You must place the Long Put and the Short Put as two separate, individual trades. ensure you choose the same expiry and make sure that the sure leg strike is lower than the long leg (for a Bear Put Spread).
The Margin "Bummer": In traditional options, the long put offsets the margin of the short put. On IG, they are treated as totally separate trades.
- The Impact: You must have enough margin to cover the short put independently (usually ~2-5% of the total exposure). The long put you bought does not reduce the margin requirement for the short put you sold.

Strategy Comparison: Risk vs. Probability

Choosing the right strategy depends on your market view and your risk tolerance. At ShareNavigator, we emphasize Probability of Profit (PoP) over "lottery ticket" home runs.

Strategy	Market View	Max Profit	Max Risk	Probability of Profit	Best For...
Long Call	Aggressively Bullish	Unlimited	Premium Paid	~30% - 40%	Fast-moving rallies.
Long Put	Aggressively Bearish	Significant	Premium Paid	~30% - 40%	Hedging a crash.
Short Put	Neutral to Bullish	Net Credit	High	75% - 85%	Consistent income.
Bull Put Spread	Neutral to Bullish	Net Credit	Capped	70% - 85%	Consistent income.
Bear Call Spread	Neutral to Bearish	Net Credit	Capped	70% - 85%	Selling "resistance."
Bull Call Spread	Moderately Bullish	Capped	Net Debit	~50% - 60%	Cheap bullish entry.
Bear Put Spread	Moderately Bearish	Capped	Net Debit	~50% - 60%	Cheap bearish entry.

Why Credit Spreads Have a Higher Win Rate

A common question students ask is: "Why not just short the stock or buy a long put if I'm bearish?"

The answer lies in the three directions of the market:

Shorting a Stock / Long Put: You only win if the market moves DOWN. If the market stays flat or goes up, you lose. (1 out of 3 scenarios).
Bear Call Spread: You win if the market moves DOWN, stays FLAT, or even RISES SLIGHTLY (as long as it stays below your ceiling). (3 out of 3 scenarios).

By "selling" time and volatility instead of just betting on direction, you turn the math of the market in your favor.

💡 The ShareNavigator Golden Rule

"We don't try to predict the next 500-point move. We try to identify the 300-point range where the market won't go. Trading is not about being 'right'; it's about not being 'wrong' enough to lose money."

🚀 Next Steps: Secure Your Trading Future

Trading theory is only 10% of the journey. The remaining 90% is mastering strategy application, market psychology, and capital preservation under live conditions.

Don't risk your capital making avoidable beginner mistakes. Leverage the experience of a dedicated trading mentor.

Schedule a Free Mentoring Session

🛠 Practice Before You Play: The Demo Account

A Bear Put Spread involves "selling" an option, which can feel intimidating for beginners. On IG Index, because the two legs of your trade are placed separately, it is very easy to make a manual error—like clicking "Buy" when you meant "Sell," or entering the wrong stake size.

Why use an IG Demo Account?

Virtual Funds: You start with £10,000 (or €10,000) in virtual capital to test your bearish theories.
Master the "Bummer": Use the demo to see exactly how much margin is tied up by your short leg and how it impacts your "Available to Trade" balance.
Zero Risk: Make your first 10-20 spread trades in a risk-free environment until the process of placing separate orders feels like second nature.

🚀 Open Your Demo Account

Don't risk your hard-earned capital while you are still learning the interface. Set up your practice environment in less than two minutes:

Open Demo Account: Click Here
Select "Spread Betting": Ensure you choose the Spread Betting demo to access
Place Your First Spread: Use our 7600/7500 FTSE example to practice entering both legs.

Course Challenge: Open a demo account today and place one Bear Put Spread on the S&P 500. Check back in 24 hours to see how the "Theta" (time decay) has affected the price of your spread!

Open Demo Account

Traditional Bear Put Strategy Course

To get a full understanding of sell put options, we recommend that you also get a full understanding of the traditional bear put strategy. Click Here to access the course.

🚀 Free Strategy Call