Otm bull put option credit spread example


Otm bull put option credit spread example


This strategy is constructed by purchasing one put option while simultaneously selling another put option with a higher strike price. DescriptionA bull put spread involves being short a put option and long another put option with the same expiration but with a lower strike. Because of the relationship between the two strike prices, the investor will always receive a premium (credit) when initiating this position.This strategy entails preciselyThe bull put spread option trading strategy is employed when the options trader thinks that the price ofthe underlying asset will go up moderately in the near term.

The bull put spread options strategy is also known as the bull put credit spread as a credit is receivedupon entering the trade.Bull Put Spread ConstructionBuy 1 OTM PutSell 1 ITM PutBull put spreads can be implemented byselling a higher strikingin-the-money put option and buying a lower strikingout-of-the-money put option on the same underlyingstock with the same expiration date. Bull Call Spread ConstructionBuy 1 ITM CallSell 1 OTM CallBy shorting the out-of-the-moneycall, the options trader reduces the cost of establishing the bullish position butforgoes the chance of making a large profit in the event that the underlying assetprice skyrockets.

The bull call spread option strategy is also otm bull put option credit spread example as the bull call debit spread as a debit is taken upon entering the trade. In Part 2, we are going to discuss the different types of bull put spreads.There are 3 types of bull put spreads. We will keep the distance of the spread (i.e.

difference in strike prices of the long and short puts) constant at 2. Transaction costs are also not included in the examples below.The current level of SPY is 152.92. 1) In the money (ITM) bull put spreadThe ITM bull put spread is characterized by ITM exercise prices of the puts. This position takes a very strong bullish view of the underlying SP.




Otm bull put option credit spread example

Otm bull put option credit spread example


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