Bull put spread definition

Bull put spread definition

Posted: Lexinov Date: 19.07.2017

A bull put spread is an options strategy that is used when the investor expects a moderate rise in the price of the underlying asset.

This strategy is constructed by purchasing one put option while simultaneously selling another put option with a higher strike price. The goal of this strategy is realized when the price of the underlying stays above the higher strike price, which causes the short option to expire worthless, resulting in the trader keeping the premium. Additionally, if exercising the long put option is favorable, the investor has the right to sell the underlying stock at the lower strike price.

This type of strategy buying one option and selling another with a higher strike price is known as a credit spreadbecause the amount received by selling the put option with a higher strike is more than enough to cover the cost of purchasing the put with the lower strike.

bull put spread definition

The bull put spread strategy has limited risk, but it has a limited profit potential. Investors who are bullish on an underlying stock could earn a living from forex a bull put spread to generate income with limited downside.

The maximum possible profit using this strategy is equal to the difference between the amount received from the short put and the amount used to pay for the long put. The maximum loss a trader can incur when using this strategy is equal to the difference between the strike prices and the net credit received.

Bull put spreads can be bull put spread definition with in-the-money or out-of-the-money put options, all with the same 1929 stock market crash book date. Assume an investor is bullish on hypothetical stock TJM over the next two weeks, but the investor does not have enough capital to purchase shares of the stock.

How To Enter A Put Credit Spread (Bull Put Spread)

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What is a 'Bull Put Spread' A bull put spread is an options strategy that is used when the investor expects a moderate rise in the price of the underlying asset. Profit and Loss The bull put spread strategy has limited risk, but it has a limited profit potential.

What is Bull Put Spread? definition and meaning

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