Identifying bear put spreads can be assisted through technical analysis. Technical analysis allows identification of expected price movement through indentifying trends through momentum indicators and trend lines. Technical indicators used to identify bear put spreads include:
- Share Price Downtrend
- Overbought – MACD and Stochastic
- Momentum indicators
- Breaks below support
Fundamental analysis can determine if a trade is viable or not. There are a number of fundamental factors that influence the option prices of a stock. When identifying a bear put spread you have a bearish outlook on the share. Therefore you are looking for negative news in the company or sector. This may be a worst then expected profit announcement or a global affect on a specific sector or industry.
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