How is a Bear Spread constructed?

The bear spread is a type of options strategy that is used when an investor expects a moderate decline in the price of the underlying asset. It is typically constructed using options with different strike prices but the same expiration date.

A bear spread is established by taking a long position in a higher strike option while simultaneously taking a short position in a lower strike option. This means that the investor buys the higher strike option (which has a lower premium and provides the right to sell at the higher price) and sells the lower strike option (which has a higher premium and obligates them to sell at the lower price).

The goal of this strategy is to profit from a decline in the underlying asset's price. As the price decreases, the value of the long position in the higher strike option is expected to increase, while the value of the short position in the lower strike option is expected to decrease. The maximum profit occurs if the underlying asset's price falls below the lower strike price at expiration, allowing the investor to benefit from the difference between the premiums of the options.

In the context of the other options, they do not accurately describe how the bear spread is constructed. The long position in a lower strike option and short position in a higher strike option would actually result