Strategy Name: BULL PUT SPREAD

Direction: Bullish Max. Risk: Capped Type: Income Volatility: N/A Max. Reward: Capped Proficiency: Intermediate

Legs:

1. Buy lower Strike (SPL) Puts2. Sell higher Strike (SPH) Puts Entry:

Try to ensure that the trend is upward or range bound. 

Risk Profile:

Net Credit: higher strike premium - lower strike premium

Max. Risk: (Higher SP – Lower SP) – Net CreditMax. Reward: Net CreditBEP: Higher SP - Net CreditInvestment: Span MarginROI: Profit/Investment

 

Exit:

With this strategy, you can simply unravel the spread by buying back the puts you sold and selling the puts you bought in the first place.

Example:

Month Long/Short Option Call/Future/Put Price QtyOct Long 5500 Put 20 1000Oct Short 5800 Put 80 1000Net Credit: 60000 Max. Risk: 240000Max. Reward: 60000

BEP: 5740

Investment: 600000ROI: 10% @ UP: 5700