Bull Put Spread
#pixarts.trade , #safebull
Market View – Mildly Bullish The Trade – Sell a put, and buy a lower strike cheaper put for protection Premium – Receive Margin – Required, But reduced due to hedging benefits. When To Do Pros Cons Time and Volatility Max Loss – Strike difference – Net premium Max Profit – Net premium
Market View – Mildly Bullish
The Trade – Sell a put, and buy a lower strike cheaper put for protection
Premium – Receive
Margin – Required, But reduced due to hedging benefits.
When To Do
- If the stock will not go up – that is i) stays still, ii) small or big up move or iii) a very small down move.
- Avoid selling when IV is low.
Pros
- Make money even if you are slightly wrong, that is the stock moves down a bit.
- If you are wrong the lower buy put prevents big losses and acts like a stop loss
Cons
- Not much. Max loss is capped.
Time and Volatility
- Gains a little time value every day
- Loses slightly if IV goes up
Max Loss – Strike difference – Net premium
Max Profit – Net premium