Bull Put Spread
Bull Put Spread – A credit spread buying OTM (lower strike price) Put and selling ATM (higher strike price) Put with 30 to 90 days until same expiration date in moderately Bullish markets that are trending up. The benefit to this credit spread is that you keep the credit if the options expire worthless.
Entry Rules
Bullish expectations for the underlying asset.
Take in a net credit of at least $3 for a $5 spread, and $6 for a $10 spread, after commissions.
Exit Rules
- Buy back position if it rises to 135% of purchase price.
- Evaluate position at 90-100% profit.
If you are still Bullish, buy back 50% of position to take your money off the table.
Buy back the remaining position if it moves back to your original purchase price.
Otherwise, let the options expire to keep all or part of the remaining credit you collected.
Profit & Loss Calculations
Maximum Risk – Limited to difference in strike prices – net credit received
Maximum Profit – Limited to net credit received
Breakeven – Higher Put strike price – net credit received
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