This strategy is just the opposite of Long Straddle. A trader should adopt this strategy when he expects less volatility in the near future. Here, a trader will sell one Call Option & one Put Option of the same strike price, same expiry date and of the same underlying asset. If the stock/index hovers around the same levels then both the options will expire worthless an
Bull Put Spread option trading strategy is used by a trader who is bullish in nature and expects the underlying asset to move in an upward trend in the near future. This strategy includes buying of an ‘Out of the Money’ Put Option and selling of ‘In the Money’ Put Option of the same underlying asset and the same expiration date. When you write a Put, you will receive prem ..
Lower Breakeven = Strike Price of Put - Net Premium, Upper breakeven = Strike Price of Call+ Net Premium
Strike price of short put - net premium paid
SHORT STRADDLE Vs BULL PUT SPREAD - When & How to use ?
SHORT STRADDLE
BULL PUT SPREAD
Market View
Neutral
Bullish
When to use?
This strategy is work well when an investor expect a flat market in the coming days with very less movement in the prices of underlying asset.
Bull Put Spread strategy is used when you're of the view that the price of a particular underlying will rise, move sideways, or marginally fall.
Action
Sell Call Option, Sell Put Option
Buy OTM Put Option, Sell ITM Put Option
Breakeven Point
Lower Breakeven = Strike Price of Put - Net Premium, Upper breakeven = Strike Price of Call+ Net Premium
Strike price of short put - net premium paid
SHORT STRADDLE Vs BULL PUT SPREAD - Risk & Reward
SHORT STRADDLE
BULL PUT SPREAD
Maximum Profit Scenario
Max Profit = Net Premium Received - Commissions Paid
Max Profit = Net Premium Received
Maximum Loss Scenario
Maximum Loss = Long Call Strike Price - Short Call Strike Price - Net Premium Received
Max Loss = (Strike Price Put 1 - Strike Price of Put 2) - Net Premium Received
Risk
Unlimited
Limited
Reward
Limited
Limited
SHORT STRADDLE Vs BULL PUT SPREAD - Strategy Pros & Cons
SHORT STRADDLE
BULL PUT SPREAD
Similar Strategies
Short Strangle
Bull Call Spread, Bear Put Spread, Collar
Disadvantage
• Unlimited risk. • If the price of the underlying asset moves in either direction then huge losses can occur.
• Limited profit potential. • In loss situations, time decay may go against you.
Advantages
• A trader can earn profit even when there is no volatility in the market . • Allows you to benefit from double time decay. • Trader can collect premium from puts and calls option .
• Benefit from the time decay in profit positions but harmful in loss positions. • Profitable when underlying stock price rises, move sideways or marginal drop. • Reduce the downside risk.