What is the primary goal of a bear spread using puts?

The primary goal of a bear spread using puts is to limit potential losses while capitalizing on a bearish outlook in the market. In a bear spread, an investor typically buys one put option at a higher strike price while simultaneously selling another put option at a lower strike price. This strategy is employed when the investor expects a decline in the price of the underlying asset, but wants to mitigate risk by capping the maximum loss.

In essence, the bear spread allows the investor to benefit from a declining market while also providing a predefined range of loss potential. This makes it an attractive strategy for those who anticipate bearish movements but still wish to protect themselves from exceeding certain loss levels. The combination of the two puts creates a limited risk, which is particularly beneficial in unstable market conditions where prices may fluctuate unpredictably.

The other options do not align with the purpose of a bear spread using puts. Significant price increases are contrary to the expectations of a bear spread, high volatility may benefit other strategies but not specifically a bear spread, and price stagnation would not leverage the investor's bearish market viewpoint effectively. Overall, the bear spread is designed specifically to manage downside risk while allowing for profit in declining price scenarios.