Bear Put Spread Strategy in Australia (2025): Benefits, Risks & Market Trends

Australian investors are no strangers to volatility, especially as 2025 brings fresh macroeconomic headwinds and regulatory shifts. Among the advanced options strategies gaining popularity is the bear put spread—a tactic designed to profit from a moderate decline in a stock or index, while limiting risk. If you’re considering ways to hedge your portfolio or speculate on downside moves without excessive exposure, it’s time to get familiar with this powerful yet risk-defined approach.

What Is a Bear Put Spread and How Does It Work?

A bear put spread involves buying a put option at a higher strike price and simultaneously selling another put option at a lower strike price on the same underlying asset, with both options having the same expiry date. This results in a net debit position (you pay to enter the trade), but your maximum loss and gain are both capped.

• Maximum profit: Achieved if the underlying falls below the lower strike at expiry. Calculated as the difference between strike prices, minus the net premium paid.
• Maximum loss: The net premium paid for the spread—no risk of open-ended losses.
• Breakeven point: The higher strike price minus the net premium paid.

For example, if you expect BHP Group (ASX: BHP) to dip moderately, you might buy a $40 put and sell a $37.50 put, both expiring in June. If BHP falls to $36, your profit is maximised. If it stays above $40, you only lose the premium paid—far less than with a naked put.

Why Are Bear Put Spreads Gaining Attention in 2025?

This year, several factors have put bear put spreads in the spotlight:

• ASX options liquidity boost: In late 2024 and early 2025, the ASX introduced tighter spreads and increased market-maker obligations, making options trading more accessible and cost-efficient for retail investors.
• Interest rate uncertainty: The RBA’s ongoing rate adjustments have fuelled market swings, prompting more investors to seek downside protection.
• Taxation clarity: The ATO’s 2025 guidance reaffirmed the treatment of multi-leg options strategies, giving investors more confidence in their after-tax returns.

Many self-directed investors are now using bear put spreads to hedge large-cap ASX holdings or to speculate on sectors likely to underperform, such as property or discretionary retail, as consumer confidence wavers.

How to Set Up a Bear Put Spread on the ASX

Setting up a bear put spread is straightforward with most Australian online brokers that support options:

1. Identify the underlying stock or index you expect to decline moderately.
2. Select your strike prices: The higher strike (to buy) should be just above the current price, and the lower strike (to sell) at your target downside.
3. Check option liquidity and spreads, especially post-2025 ASX updates, to ensure efficient pricing.
4. Calculate your net premium, maximum loss, and profit potential before entering the trade.
5. Monitor and manage the position—consider closing early if the underlying moves sharply, or holding to expiry for maximum gain.

Example: Suppose the S&P/ASX 200 is trading at 7,800. You buy a June 7,750 put for $50 and sell a June 7,650 put for $20. The net debit is $30. If the index falls to 7,600 or below, your spread is worth $100—so your profit is $70 per contract.

Risks, Rewards, and Who Should Consider This Strategy

Bear put spreads are best suited to investors who:

• Have a moderately bearish view—expecting a decline, but not a crash.
• Want limited, defined risk versus outright short selling or buying puts.
• Understand options pricing and the impact of volatility.

Risks: If the underlying stays above the higher strike, you lose your net premium. If it falls too far, your gain is capped. Transaction costs can eat into profits, so 2025’s tighter ASX spreads are a welcome improvement.

Rewards: You know your worst-case scenario upfront, and you avoid the margin calls or unlimited losses associated with shorting stocks. Tax treatment for multi-leg strategies is now more clearly defined by the ATO, making after-tax outcomes easier to plan for.

Real-World Use Cases in 2025

Australian investors have used bear put spreads this year to:

• Hedge large bank share portfolios ahead of RBA rate decisions.
• Speculate on further weakness in ASX-listed tech after disappointing earnings.
• Manage risk in SMSF portfolios without breaching leverage or margin lending rules.

As markets remain uncertain, bear put spreads offer a smart, risk-defined way to position for moderate declines—without betting the farm.