Bear Put Spread Question


So I need some help understanding how a bear put spread works and below is an example trying to explain it.

The Basics of a Bear Put Spread
For example, let's assume that a stock is trading at $30. An options trader can use a bear put spread by purchasing one put option contract with a strike price of $35 for a cost of $475 ($4.75 x 100 shares/contract) and selling one put option contract with a strike price of $30 for $175 ($1.75 x 100 shares/contract).
In this case, the investor will need to pay a total of $300 to set up this strategy ($475 – $175). If the price of the underlying asset closes below $30 upon expiration, the investor will realize a total profit of $200. This profit is calculated as $500, the difference in the strike prices ($35 – $30) x 100 shares/contract – $300, the net price of the two contracts [$475 – $175] equals $200.
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With the example above, the profit from the bear put spread maxes out if the underlying security closes at $30, the lower strike price, at expiration. If it closes below $30 there will not be any additional profit. If it closes between the two strike prices there will be a reduced profit. And if it closes above the higher strike price of $35 there will be a loss of the entire amount spent to buy the spread.

From my understanding, if I sell a put option with a strike price of $30 for $175, and it ends up being LESS than the strike price, I owe about $2,825 ((30*100)-175), correct?

And if Im running a long put at $35 for $475 at the same time as my short put, I can gain some money but surely I can't gain more than $2,825, right?

Since a bear put spread is supposed to be profitable when a stock is low, how can it really be profitable if I owe that much due to my short put? Am I missing something or have a misunderstanding of both of the separate processes? Would appreciate any help with this.


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