The dual bear spread is a bearish strategy that combines a bearish bear put debit spread with a bearish bear call credit spread, and for which you receive a light credit or have to pay a very small debit.
Dual Bear Spread (Delta Buster)
The delta buster combines an inexpensive ATM long bear put spread , typically 10-point/$10 wide, with an expensive OTM short bear call spread that results in a negative -30Δ, give or take.
Risk is limited, so profit as well, PoP is low to medium,
The position benefits is the underlying price decreases/stays below the upside breakeven.
STRATEGY TYPE
OUTLOOK/DIRECTION
VOLATILITY/IVR
DTE ENTRY-EXIT
NET POSITION
MAX RISK/LOSS
MAX REWARD/PROFIT
LEGS
Capital Gain
Bearish
Low (<30)
Entry: 60 – 90 DTE
Exit: 30 -21 DTE
Slightly credit or debit
Defined: width of bear call spread -/- debit/+credit
Capped: width of bear put spread -/- debit/+ credit
Bear put ATM (10 point/$10 wide)
Bear call OTM (covers/offsets costs bear put)
Same expiration

Considerations
General
The main goal is to take advantage of the volatility skew and to get short delta in a downward-moving market.
- Positions with positive delta increase in value if the underlying goes up.
- Positions with negative delta increase in value if the underlying goes down.
These are the considerations for entering a delta buster:
- The outlook is bearish outlook
- You don’t want to spend very much (or want to take in a small credit) in order to establish the position.
- Because you are selling the call to the upside, your expectation would be that there is limited risk of the stock making a move higher. However, your risk is limited because you buy the far call, limiting your exposure.
- When the portfolio is overly positive beta-weighted (Δβ) and poses too much risk to the upside, and may benefit by adding short delta to neutralize the risk.
- The expectation that the market and underlying (stock, ETF, index, future) will go down: the outlook is bearish.
- Implied Volatility (IV)/IVR (IV Rank) is low (<30), looking for options to increase in value over time*
- Combining/managing positions
- There is volatility skew
- When (short bear) calls are expensive and (long bear) puts are cheap.
Description
Set-Up
- ‘ Buy to open’ (BTO) 1 ATM or slightly OTM bear put spread ( in US 1 contract = 100 shares), 10 point/$10 wide
- ‘Sell to open’ (‘STO’) 1 OTM bear call spread that offsets/covers the bear put spread costs
- Sell the same number of strikes
- Arrange both put strikes for a slight credit or very small debit, and a net -30 Δ
Example
QQQ trading at $291.20 on 2 Mar 2023. IV/IVR <30.
Buy 1 long bear put at 291(ATM)/281(OTM) strikes (-0.51/-0.36 deltas) for a $375 debit put premium (to be paid)
Sell 1 short bear call at 299(OTM)/309(OTM strike (0.37/0.23 deltas) for a $361 credit call premium (to be credited to your account)
Resulting in a credit to be received of $14 and delta of close to -30 for the position.
NET POSITION
MAX RISK
MAX REWARD
BREAKEVEN UP
BREAKEVEN DOWN
Credit
$1014 (width of bear call spread + net credit)
$1014 (width of bear put spread + net credit)
Lower strike price + net debit
Short bear call = close to put spread debit
Related Options Strategies
Volatility skew strategies.
The Greeks
Since the delta buster is made up of a bear put and a bear call spread, the Greeks behave the same. Go to bear put spread and bear call spread to read more and see below that for both spreads the Greeks are similar.
The Bear Put Greeks
The Bear Call Greeks
GREEK
+/-
Notes
Profile
Delta (direction speed)
–
Delta (speed) is negative and is at its fastest in between the strikes. Notice how Delta slows down when the position is deep ITM or
OTM.

Gamma (acceleration)
–
±
Gamma (acceleration) peaks inversely below the lower (sold) strike and peaks above the higher (bought) strike

Theta (time decay)
+
±
Time decay is harmful to the position when it is loss-making and helpful when it is ITM.

Vega (volatility)
+
±
Volatility is helpful to the position when it is loss-making and harmful when it is profitable.

Rho (interest)
+
Positive, higher interest rates
are generally unhelpful to the position

GREEK
+/-
Notes
Profile
Delta (direction speed)
–
Delta (speed) is negative and is at its fastest in between the strikes. Notice how Delta slows
down when the position is deep ITM or OTM.

Gamma (acceleration)
+
±
Gamma (acceleration)
peaks above the upper (bought) strike and peaks inversely below the lower (sold) strike.

Theta (time decay)
–
±
Time decay is helpful to the position when
it is profitable and harmful when it is not.

Vega (volatility)
–
±
Volatility is helpful to the position when it is unprofitable and harmful when it is
profitable

Rho (interest)
+
Higher interest rates are generally unhelpful to the position


Entry Rules
Profitable bear puts require correctly selecting bearish underlyings AND good timing.
Criteria
- Acknowledge whether market sentiment allows trade (typically bearish).
- Check whether trade fits in portfolio allocation rules.
- Ensure stock meets all of your selection criteria (volume, open interest, ask-bid range, etc.).
- IV/IVR below 30%.
- Ensure the trend is down/bearish: below SMA 20 and below the MACD line.
- Ensure at least three other technical momentum indicators are positive for a bearish trade (the more bearish the bias).
- Identify the clear areas of support and resistance.
- Make sure there are no major events (dividends, earnings) within 30 days of the expiry date.
- Profitability of Profit at selected strikes: around 50%.
- Backtest (since 2006 and last 200 trades): at least $1.00 (average and mean) profit/day.
Technical Indicators Used
- Trend = bearish
- Support & Resistance = the underlying has just experienced an increase to a clear resistance level
- RSI = overbought
- SMA 20 and MACD
- Bollinger Bands in combination with Keltner Squeeze: at the top and outside Keltner bands
- ADX/DMI: increasing up and above 20
- ATR low
P/L and Risk Profile
Net Position
Slightly debit or credit.
Theoretical Profit
The maximum risk is the width of the bear put spread -/- debit/+credit.
This is realized if the underlying price decreases below the lower put strike (both calls are then ITM).
Theoretical Risk/Risk Profile
The maximum risk is the width of the bear call spread -/- debit/+credit.
This is realized if the underlying price increases to/above the higher call strike (bot calls are then ITM).
Breakeven
Where the short bear call net credit = bear put spread net debit.
Managing and Closing Position
Halfway to/Near Expiration
- Theta/time decay has only a slight positive/negative impact on a delta buster, depending on which spread is ITM/OTM.
Rules for Managing/Adjusting Position
- Set alerts on breakeven/predetermined targets: breakeven/targeted stop to better manage position, mitigate losses, or avoid assignment.
- At 21 DTE.
- If the underlying price increases in or between the bear call strikes, adjust the call strikes and/or roll out in time for net even.
Rules for Closing Position/Exiting the Trade
- For a 25%-50% profit, or when there’s no longer a need for short delta.
- If the underlying price decreases or is slightly below the long put, close the position.
- Close before the final month before expirations (to avoid time decay), so not later than around 35 – 21 DTE.
Mitigating a loss
- Work with a (mental) stop loss based on an underlying asset of either 50% of the premium paid
- Treat the spreads as you would when opened independently
Additional Notes
Advantages
- Reduces delta exposure portfolio
- Capped downside/risk
Disadvantages
- Limited profit
- Same risks as for bear spreads opened independently
Exercise/Assignment
Ex-dividend assignment risk (short strikes):
- Short ITM call whose corresponding put value is < the dividend
- Short ITM put whose strike is abve the underlying price