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
Bear Call Spread option trading strategy is used by a trader who is bearish in nature and expects the underlying asset to dip in the near future. This strategy includes buying of an ‘Out of the Money’ Call Option and selling one ‘In the Money’ Call Option of the same underlying asset and the same expiration date. When you write a call, you receive premium thereby r ..
BULL PUT SPREAD Vs BEAR CALL SPREAD - When & How to use ?
BULL PUT SPREAD
BEAR CALL SPREAD
Market View
Bullish
Bearish
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 you are bearish in market view. The strategy minimizes your risk in the event of prime movements going against your expectations.
Action
Buy OTM Put Option, Sell ITM Put Option
Buy OTM Call Option, Sell ITM Call Option
Breakeven Point
Strike price of short put - net premium paid
Strike Price of Short Call + Net Premium Received
BULL PUT SPREAD Vs BEAR CALL SPREAD - Risk & Reward
BULL PUT SPREAD
BEAR CALL SPREAD
Maximum Profit Scenario
Max Profit = Net Premium Received
Max Profit = Net Premium Received - Commissions Paid
Maximum Loss Scenario
Max Loss = (Strike Price Put 1 - Strike Price of Put 2) - Net Premium Received
Maximum Loss = Long Call Strike Price - Short Call Strike Price - Net Premium Received
Risk
Limited
Limited
Reward
Limited
Limited
BULL PUT SPREAD Vs BEAR CALL SPREAD - Strategy Pros & Cons
BULL PUT SPREAD
BEAR CALL SPREAD
Similar Strategies
Bull Call Spread, Bear Put Spread, Collar
Bear Put Spread, Bull Call Spread
Disadvantage
• Limited profit potential. • In loss situations, time decay may go against you.
• Limited amount of profit. • Margin requirement, more commission charges.
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.
• This strategy takes advantage of time decay. • Investors can get profit in a flat market scenario. • Investors can earn options premium income with a lower degree of risk.
