SectorRotation.com 321options

"Where having fun is an Option" - SectorRotation.com

   SectorRotation.com  
 
 
 
   
 
 

Home

Bullish Strategies

Neutral Strategies

Bearish Strategies

About us

     
 

  Bull Put Spread  ( Other Bullish: Long Call - Covered Call - Protective Put - Bull Call Spread - Call Back Spread - Naked Put )

 

Bull put spread strategy chart

When your feeling on a stock is generally positive, bull spreads are nice low risk, low reward strategies. One way to create a bull spread that you might not immediately consider is by using put options at or near the current market price of the stock.

Example
If you have a bullish short-term feeling about Coca Cola Co. (KO) when it is trading at $54.14, you might put on a bull put spread by selling the 55 put @ $2.55 and buying the 50 put for $0.85. In this case, the maximum profit would be the $1,700 you received when you initiated the position.

The maximum loss would be the difference between strike prices less the $1,700 credit you received for putting on the trade. In this example, the maximum loss would be $3,300 (((55 - 50) x 1,000) - $1,700). For margin purposes, however, the maximum loss is considered to be the difference between strike prices-in this case $5,000-because that is the amount that must be available should the position reach a maximum loss.

 

KO Trading @ $54.14
Sell 10 KO AUG 55 Put @ $2.55 ($2,550)
Buy 10 KO AUG 50 Put @ $0.85 $850
Credit from Trade ($1700)

 

 

 

Bull Put ChartBull Put Graph

If you like the idea behind the bull put spread, be sure to check out bull call spreads and bear put spreads. These can be comparable strategies depending on your objectives.

   

 

 

 

2004 - Present; Sector Market Watch Journal  Disclaimer/Disclosure/Terms of Use