16 lines
1.0 KiB
Plaintext
16 lines
1.0 KiB
Plaintext
Bull Put Spread
|
|
The last of the four vertical spreads is a bull put spread. A bull put spread is
|
|
a short put with one strike and a long put with a lower strike. Both puts are
|
|
on the same underlying and in the same expiration cycle. A bull put spread
|
|
is a credit spread because the more expensive option is being sold, resulting
|
|
in a net credit when the position is established. Using the same options as in
|
|
the bear put example:
|
|
With ExxonMobil at $80.55, the June 80 puts are sold for 1.75 and the
|
|
June 75 puts are bought at 0.45. The trade is done for a credit of 1.30.
|
|
Exhibit 9.10 shows the payout of this spread if it is held until expiration.
|
|
EXHIBIT 9.10 ExxonMobil bull put spread.
|
|
The sale of this spread generates a 1.30 net credit, which is represented by
|
|
the maximum profit to the right of the 80 strike. With ExxonMobil above
|
|
$80 per share at expiration, both options expire OTM and the premium is
|
|
all profit. Between the two strike prices, the 80 put expires in the money. If
|
|
the ITM put is still held at expiration, it will be assigned. Upon assignment, |