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 involves buying of an underlying asset in the cash/futures market and simultaneously selling ATM Calls double the number of long quantity. This strategy is used by a trader who is neutral on the market and bearish on the volatility in the near future. Here profits will be capped up to the premium amount and risk will be potentially unlimited. ..
Upper Breakeven Point = Strike Price of Short Calls + Points of Maximum Profit, Lower Breakeven Point = Strike Price of Short Calls - Points of Maximum Profit
BULL PUT SPREAD Vs RATIO CALL WRITE - When & How to use ?
BULL PUT SPREAD
RATIO CALL WRITE
Market View
Bullish
Neutral
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 by a trader who is neutral on the market and bearish on the volatility in the near future.
Action
Buy OTM Put Option, Sell ITM Put Option
Sell 2 ATM Calls
Breakeven Point
Strike price of short put - net premium paid
Upper Breakeven Point = Strike Price of Short Calls + Points of Maximum Profit, Lower Breakeven Point = Strike Price of Short Calls - Points of Maximum Profit
BULL PUT SPREAD Vs RATIO CALL WRITE - Risk & Reward
BULL PUT SPREAD
RATIO CALL WRITE
Maximum Profit Scenario
Max Profit = Net Premium Received
Net Premium Received - Commissions Paid
Maximum Loss Scenario
Max Loss = (Strike Price Put 1 - Strike Price of Put 2) - Net Premium Received
Price of Underlying - Strike Price of Short Call - Net Premium Received OR Purchase Price of Underlying - Price of Underlying - Net Premium Received + Commissions Paid
Risk
Limited
Unlimited
Reward
Limited
Limited
BULL PUT SPREAD Vs RATIO CALL WRITE - Strategy Pros & Cons
BULL PUT SPREAD
RATIO CALL WRITE
Similar Strategies
Bull Call Spread, Bear Put Spread, Collar
Variable Ratio Write
Disadvantage
• Limited profit potential. • In loss situations, time decay may go against you.
• Potential loss is higher than gain. • Limited profit.
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.