A Put Spread is an options trading combo strategy where you buy a Put and sell another one at the same time but with different strikes. This option strategy has limited profit and limited loss potential.

1. What Is A Put Spread?
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Options Trading

2. What is a Put Spread?
Most people who start to
invest their time and
money into options trading
come to realize they need
to use options spreads as
well. Let's see what a Put
Spread is.
A Put Spread is an options trading combo strategy where
you buy a Put and sell another one at the same time but
with different strikes. This option strategy has limited
profit and limited loss potential.
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3. Bear Put Spread vs. Bull Put Spread
There are two types of Put Spreads to choose from
in options trading.
Either you buy a Put Spread or you sell a Put
Spread.
If you buy a Put Spread it is called Bear Put Spread,
when you sell it the name is Bull Put Spread.
See below two examples of them.
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4. Bear Put Spread - A Debit Option
Trading Strategy
Bear Put spread is a debit option strategy, which
means you BUY the Put spread. In this example
you buy the higher strike Put and you sell the
lower strike Put. Thus you create a bearish bias
with Put spreads. If your underlying goes up, you
lose around $200, if it goes down beyond your
shorted strike, you will make the maximum profit
which is around $300 in this case.This is a debit
option strategy which means you get to PAY for this
in the form of a premium once it's expired.
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5. Bear Put Spread risk graph
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6. Bull Put Spread - A Credit Option
Trading Strategy
In options trading a Bull Put Spread is when you
SELL the Put Spread. So you sell the higher strike
Put and buy the lower strike Put. This way you
create a bullish bias trading options. You will make
the max profit when the price stays above the
shorted Put strike and you will incur the max loss
when the price goes down to the shorted strike.
This is a credit option strategy which means you
RECEIVE a premium for shorting it.
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7. Bull Put Spread risk graph
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8. What is your trading bias?
If you are bearish, you should go with the Bear Put Spread. You
have to understand that buying means that your strategy is a
DEBIT strategy, and you pay for it. Time is working against you,
which means that if the underlying doesn't move into your favor
quickly, you will lose money with time decay.
On the other hand if you are bullish, you will have to sell a Put
Spread which is a Bull Put Spread. In this way you don't have a
clear bias. Either the market stays sideways or goes up, you will
make money. Time will work on your side since this is a CREDIT
strategy.
The choice depends on your market bias. But I guess you see that
you have a higher chance to make money with Bull Put Spread
because not only time is working for you, but you also have two
directions where you can make money: sideways and up move.
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9. Feel free to ask me!
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