Explanation:
A bear put spread involves buying a put option with a higher strike price and simultaneously selling a put option with a lower strike price on the same underlying asset with the same expiration date. In this scenario, buying a $25 strike put and selling a $20 strike put is a directional strategy designed to profit from a decline in the underlying asset's price, establishing a bear spread.
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Q.70 An investor who buys a put option with a strike price of $25 and sells a put option with a strike price of $20 is most likely following which of these strategies:
A
Bull spread
B
Box spread
C
Butterfly spread
D
Bear spread