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
This strategy is applied when trader goes long on the underlying asset i.e. he buys the stock in cash market. He has a bullish view and expects the market to rise in the near future, but simultaneously has the fear of downward movement of the markets. In order to cover his position from vulnerabilities he buys one ATM Put Option of the same underlying asset. Here, a trader wi ..
BULL PUT SPREAD Vs MARRIED PUT - When & How to use ?
BULL PUT SPREAD
MARRIED PUT
Market View
Bullish
Bullish
When to use?
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.
This Strategy work when the investor goes long in any stock. He expects the rise in market in future.
Action
Buy OTM Put Option, Sell ITM Put Option
Buy 250 XYZ Shares, Buy 1 ATM Put Option
Breakeven Point
Strike price of short put - net premium paid
Purchase Price of Underlying + Premium Paid
BULL PUT SPREAD Vs MARRIED PUT - Risk & Reward
BULL PUT SPREAD
MARRIED PUT
Maximum Profit Scenario
Max Profit = Net Premium Received
Profit = Price of Underlying - Purchase Price of Underlying - Premium Paid
Maximum Loss Scenario
Max Loss = (Strike Price Put 1 - Strike Price of Put 2) - Net Premium Received
Max Loss = Premium Paid + Commissions Paid
Risk
Limited
Limited
Reward
Limited
Unlimited
BULL PUT SPREAD Vs MARRIED PUT - Strategy Pros & Cons
BULL PUT SPREAD
MARRIED PUT
Similar Strategies
Bull Call Spread, Bear Put Spread, Collar
Long Call
Disadvantage
• Limited profit potential. • In loss situations, time decay may go against you.
Cost of the put options eats into profit margin.
Advantages
• 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.
