hedging strategy by buying and selling puts
I found the description of this strategy a bit confusing, it does look like a bear spread. and as I recall a bear spread max loss is the difference between premiums, so no downside “unlimited exposure”. so why in R11, when applying this same strategy for a holder of a concentrated single asset, it said that the investor become exposed to donwside risk if the price goes below the strike of the shorted put ??
As I understood it in L2, if the price goes below low strike price, the investor can still use the put of the higher strike and resell at a higher price than the one he would eventually forced to buy at it ( strike 2 <strike 1) … it seems to me that there’s no downside risk below strike 2
PS: I’m referring to section 4.3.2 in the curriculum
thanks in advance