|
The Bull Put Spread should be used when you feel positive about a stock/index that it will go up in price.
Constructing a Bull Put Spread
Simultaneously,
- Sell Higher Strike Put Option
- Buy Lower Strike Put Option with the same expiry month
Example – Bull Put Spread with 10 Contracts
If you have a bullish feeling about an Index - say, OEX, when it is trading at $570, you might enter a position on a bull put spread by selling the 565 put @ $3.00 and buying the 560 put for $2.00. The premium that you would collect upfront, in this case, would be $1,000 ($1.00 x 10 Contracts x 100 units per contract). This premium would also be your maximum profit for this position regardless on how bullish OEX may be.
Your maximum loss would be the difference between strike prices less the $1,000 credit you received for the trade. Since the difference between the strike prices is 5 (565 – 560), your maximum loss would be $4,000 ($5000 - $1000). Your return on investment would be 25% ($1000/$4000).
What is the best time to enter a Bull Put Spread?
Market Uptrends
Generally speaking, if the major indices are on strong uptrends, then you would want to focus more on bull put spreads. However, if the market is overbought, you have to be cautious with your entry. Markets, rarely, move in a straight line. A market that is overbought will come with corrections. Watch out for reversal signs.
Sideways Markets
When the major indexes have been trending sideways and are showing no strong trend in either direction, then the credit spread investor might want to have a mix of bull put spreads and bear call spreads. Since, as history would show, the indices have a tendency to move higher over time, the mix of trades should usually be biased towards the bullish side.
|
START YOUR 30-DAY TRIAL TODAY FOR ONLY $29.95
This trial is provided for you to get to know us. Once you do, we are confident that you will be a subscriber for a long time because many of our Subscribers have profited
during the trial period to pay several years of subscription.
Your card will ONLY be charged $29.95 now.
For whatever reason that you are unhappy, just write to us within the trial period, we will stop all recurring billing.
Start Making $3000 to $5000 EVERY Month
Do NOT Procrastinate Further
Take The Next Step Now!
 |
|
Remember to also pick up your SPECIAL BONUSES when you join us.
 |
BONUS #1 - Reminiscence of A Stock Operator
Jesse Livermore is considered by many of today's top Wall Street traders as the greatest trader who ever lived. Livermore broke new ground in trading the market. His timing techniques, money management systems, and high-momentum approach to trading in stocks and commodities was revolutionary, and remains valid today. He was widely blamed for the 1929 stock market crash which he shorted heavily. He made more than $100 million of profit which he subsequently lost. |
| |
|
|
BONUS #2 - The Science of Getting Rich
In this power-packed ebook, Wallace Wattles explains how you can learn to think and act in a Certain Way – from the perspective of thinking and acting in the creative world of Truth which is infinite and unlimited regardless of appearances, instead of thinking and acting in the Illusionary competitive world which is finite and limited by appearances. When you think and act in the Certain Way, he explains, you become truly rich, and bring the power of lasting transformation into your life.
|
|
|
|
|
|
| |
