21 lines
1.5 KiB
Plaintext
21 lines
1.5 KiB
Plaintext
Basic Put Spreads
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Put spreading strategies do not differ substantially in theory from their accompany-
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put spreads, as was also the case with call spreads. However, because puts are more
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oriented toward downward stock movement than calls are, some bearish put spread
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strategies are superior to their equivalent bearish call spread strategies.
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The three simplest forms of option spreads· are:
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1. the bull spread,
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2. the bear spread, and
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3. the calendar spread.
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The same types of spreads that were constructed with calls can be established with
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puts, but there are some differences.
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BEAR SPREAD
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In a call bear spread, a call with a lower striking price was sold while a call at a high
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er striking price was bought. Similarly, a put bear spread is established by selling a
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put at a lower strike while buying a put at a higher strike. The put bear spread is a
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debit spread. This is true because a put with a higher striking price will sell for more
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than a put with a lower striking price. Thus, on a stock with both puts and calls trad
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ing, one could set up a bear spread for a credit ( using calls) or alternatively set one
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up for a debit (using puts):
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