What is the purpose of a bear spread in options trading?

A bear spread in options trading is designed to benefit from a decline in the price of the underlying asset. This strategy typically involves buying and selling options at different strike prices or expiration dates, with the goal of maximizing profit as the price of the underlying asset falls.

Traders employ bear spreads when they expect a downturn in the market or a specific asset, allowing them to potentially capitalize on that anticipated decrease while mitigating risk compared to outright short selling. The configuration of a bear spread also caps potential losses, providing a structured approach to trading in a bearish market.

While other options relate to trading strategies or outcomes, they do not align with the specific intent of a bear spread. Therefore, the focus on profiting from a decline in the underlying asset's price accurately captures the essence of this trading strategy.