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Options Strategies
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Bull Put Spread
| Strategies |
Bull Put Spread |
| Component |
Buy lower strike price/level put, sell higher strike price/level put of the same month |
| Potential Profit |
- When the stock price/index level is above the break-even point
- Limited to the net premium received
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| Maximum Loss |
Limited to the difference between the two strike prices/levels minus the net premium received |
| Time Value Impact |
Neutral |
| Break-even |
Higher strike price/level minus net premium received |
| Remarks |
As different from a Bull Call Spread which would result in net premium paid, a Bull Put Spread would result in net premium received, as the premium for the lower strike price/level put is lower than that of the higher strike price/level put. |
Example
| Component |
Buy ABC May $180 Put, pay $10, and sell ABC May $210 Put, receive $30 |
| Net Premium |
Receive $30-$10=$20 |
| Break-even |
$210-$20=$190 |
| Profit when |
Stock price is above $190 |
| Potential Profit |
$20 |
| Potential Loss |
($210-$180)-$20=$10 |
| Time Value Impact |
Neutral |
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