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
Bull Call Spread option trading strategy is used by a trader who is bullish in nature and expects the underlying asset to give decent returns in the near future. This strategy includes buying of an ‘In The Money’ Call Option and selling of ‘Deep Out Of the Money’ Call Option of the same underlying asset and the same expiration date. ..
BULL PUT SPREAD Vs BULL CALL SPREAD - When & How to use ?
BULL PUT SPREAD
BULL CALL SPREAD
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 is used when an investor is Bullish in the market but expect the underlying to gain mildly in near future.
Action
Buy OTM Put Option, Sell ITM Put Option
Buy ITM Call Option, Sell OTM Call Option
Breakeven Point
Strike price of short put - net premium paid
Strike price of purchased call + net premium paid
BULL PUT SPREAD Vs BULL CALL SPREAD - Risk & Reward
BULL PUT SPREAD
BULL CALL SPREAD
Maximum Profit Scenario
Max Profit = Net Premium Received
(Strike Price of Call 1 - Strike Price of Call 2) - Net Premium Paid
Maximum Loss Scenario
Max Loss = (Strike Price Put 1 - Strike Price of Put 2) - Net Premium Received
Net Premium Paid
Risk
Limited
Limited
Reward
Limited
Limited
BULL PUT SPREAD Vs BULL CALL SPREAD - Strategy Pros & Cons
BULL PUT SPREAD
BULL CALL SPREAD
Similar Strategies
Bull Call Spread, Bear Put Spread, Collar
Collar
Disadvantage
• Limited profit potential. • In loss situations, time decay may go against you.
• Limited profit potential to the higher strike call sold if the underlying stock price rises. • Maximum profit only if stock rises to the higher of 2 strike prices selected.
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.
• Allows you to reduce risk and cost of your investment. • When placing the spread, exit strategy is pre-determined in advance. • Risk is limited to the net premium paid.