Bull and bear spreads are both constructed with either two calls or two puts with a lower and higher strike price.

• Bull spread: buy the option with a lower strike price, sell the option with a higher strike price.
• Bear spread: buy the option with a higher strike price, sell the option with a lower strike price.

This investor is selling an option with a low strike price and buying an option with a high strike price, so it is a bear spread.

The maximum profit is found at a price of 50. The profit consists of:

• Profit on the long 65 put is $15.
• Loss on the net premium is $2 (i.e., paid −5, earned +3).
• Overall profit = +$13.

(Book 3, Module 40.2, LO 40.c)