Bull Put Spread TUTORIAL [Vertical Spread Options Strategy]

Рет қаралды 153,685

5 жыл бұрын

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The bull put spread is a bullish options strategy consisting of two separate put option transactions. One put option is sold and another put option at a lower strike price is purchased (same expiration cycle).
The bull put spread is one of the four vertical spread strategies.
The strategy has many other names that options traders use, including the short put spread, put credit spread, and simply selling a put spread.
In this video, we'll cover:
- Bull put spread explained (setup, explanation, max profit potential, max loss potential, breakevens)
- Historical trade examples so you can see exactly how the bull put vertical spread strategy has performed in the past in various scenarios.
- A demonstration of setting up a short put spread on the tastyworks trading platform.
Be sure to leave a comment down below with any questions you may have!
=== RECOMMENDED VIDEOS/RESOURCES ===
Vertical Spreads (Basics for Beginners): www.projectfinance.com/vertic...
Options Trading For Beginners (PLAYLIST): • Become an Options Trad...
tastytrade Tutorials (PLAYLIST): • tastyworks Tutorials
Option Pricing EXPLAINED: • Option Prices EXPLAINE...
Options Trading 101: • Stock Options Trading ...
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Пікірлер: 238

@projectfinance Жыл бұрын

✅ New to options trading? Master the essential options trading concepts with the FREE Options Trading for Beginners PDF and email course: geni.us/options-trading-pdf

@mahendrarathore4833 4 жыл бұрын

As always, Chris You do an outstanding job of creating and delivering best education. Kudos to you! Very helpful and useful examples of BPS.

@Sarasdad91 3 жыл бұрын

Another great video lesson on options trading, Chris. Thank you. Been weighing the P/L potential of Puts VS Bull Put credit spreads. As you said, comes with less a profit than average puts, but less loss as well.

@fiddlerka9150 3 жыл бұрын

Thank Chris for the video! Best content for options I have found on KZfaq! Keep it up

@SweetestTrade 3 жыл бұрын

One of the best explanation video on Bull Put Spread! Thank you!!

@bimmerman2946 3 жыл бұрын

Thank you for sharing, now i have a better understanding of whether i will be assigned or not, from the last part of the video. Thanks again

@Ed-wd8nw 4 жыл бұрын

Again, very helpful and excellent video! Thank you and more power to you!

@ernestlittle14 3 жыл бұрын

This is one of the powerful, simple and easy to understand training videos I have ever seen. I don't know who you are but are good....

@paulliao7881 2 жыл бұрын

You're the best coach I've seen so far on KZfaq, really well explained, very easy to understand, thank you. Quick question, if Max Profit > Max Loss in any credit strategy does that mean I'll still make the difference even with a loss on the trade？

@davidfordonez 4 жыл бұрын

Thank you 🙏🏼 for sharing your knowledge, I greatly appreciate it!

@projectfinance 4 жыл бұрын

Of course! I'm glad you liked the video. -Chris

@trgastro 3 жыл бұрын

Excellent. love the content and the speed, at which it is delivered.

@bowwow916 4 жыл бұрын

thank you for the great video. finally i understand it.

@steventon2999 2 жыл бұрын

Chris - another great video. I'm curious how you're generating the spread price graph found @8:55? Did you design it or is it part of a trading system graph? Need a visual to show my options position's P/L. Thanks!

@itsallgoodbro9080 4 жыл бұрын

Very informative video. I just have one question. Why would you be assigned shares of stock if the price expires between the short put and the long put but not if both put options are in the money ?

@vipulyevle6380 2 жыл бұрын

Detailed and to the point explanation, So helpful.

@ShopRxLA 5 жыл бұрын

Great video for beginners like me. I would love if you did an example of how to minimize loss. Thanks so much, keep it up :)

@projectfinance 5 жыл бұрын

Thank you!

@rashmipatel4602 3 жыл бұрын

Hi Chris, Your videos have been very helpful for a beginner such as myself... However, Is there a couple pager/cliff notes (key points for each vertical trade type) that would have all Vertical Spread types details?

@cilangkapdotcom 4 жыл бұрын

Thanks from Indonesia Chris. Learning heaps from you!

@projectfinance 4 жыл бұрын

Thank you for commenting/watching! I'm glad you're liking the vids! -Chris

@opoknock 4 жыл бұрын

Excellent presentation in the videos by the way.

@ericd878 3 жыл бұрын

The best explanation I've ever seen.

@SteveSam66 4 жыл бұрын

Very helpful!! Thanks Chris

@lsrk1d 5 жыл бұрын

That was so helpful, thank you guys!

@projectfinance 5 жыл бұрын

You're welcome! Thanks for watching.

@scottamolinari 2 ай бұрын

I like how you've explained the downside or risk of what can happen with the option spread. There are a ton of people explaining options on YT and most only say "look at how you can win!" That gets annoying to me personally, because it is all just somewhat calculated guessing/ betting in the end and you should know exactly what happens, if you bet wrong.

@shahidahmad701 Жыл бұрын

Like always a great lecture.

@adamchan2087 3 жыл бұрын

Great video! How to choose between Long call spread vs Short put spread which are both bullish.

@karthikaramkumar3009 2 жыл бұрын

Great Explanation, thanks a lot

@danieljung8927 4 жыл бұрын

Nice video - what happens if the share price falls between the spread width on expiry? for example, your last example of IWM, if the stock price falls to 142 at expiration, is it correct to say that it means both positions are not in your favour so max loss is: (1) your long position becomes worthless (OTM) and (2) your short position also makes losses (since it is ITM) - what happens to this short position (does a buyer would exercise the option and you have an obligation to sell the stock at 142)? Thanks (sorry if my q doesn’t make sense..)!

@nicoGZo Жыл бұрын

Super helpful! Thank you!

@haydenhenderson5954 3 жыл бұрын

You nailed it man these are getting me through my exam

@heyitsanthony6366 3 жыл бұрын

Great video: I have a question. If you are bullish on the stock wouldn’t it make more sense to buy the safety put contract at a further out time frame to give your underlying stock a chance to move back up instead of instantly selling out of the entire position and booking the loss straight away. If you are overall bullish on the stock wouldn’t this be a more optimal strategy. You’d make less because you’d pay higher premium for the “insurance” Or does this not work?

@albadriali 2 жыл бұрын

Excellent video! Question: Can I "roll" with this strategy to avoid losses and delay assignments?

@bathsalt79 3 жыл бұрын

If English is not your 1st language, you may find he speak a little fast and your mind can't process quick enough. i suggest going to the setting and reduce the speed to 0.75x. It worked for me. This video is by far the best in describing the logic behind the strategy.

@frankmanson3 3 жыл бұрын

love your videos, they are money! keep it up

@Tujuhub 3 жыл бұрын

Hi Chris at the end of the video, you said that if the stock price is below the short put's strike but above the long put's strike, will end up with purchasing 100 shares of stock (per put). Is it still going to happen even if I didn't have enough cash/net liquid to purchase the 100 shares? in other words, I get 100 shares of stock at Break Even?

@mariogeorgiev3745 3 жыл бұрын

Thank you! Great video...again :)

@Sean-xu5ti 3 жыл бұрын

i dont know, I really like this guy & the knowledge he is dropping. I feel like these vids will be like classic hits that go on for millions of views. Smooth, concise and to the point. Me? Option exits strats are my issue.

@ocean4989 4 жыл бұрын

Great,thx for sharing!!!

@jamie200827 3 жыл бұрын

thanks Chris; great video

@lliang9838 4 жыл бұрын

Hey Chris, since Bull Call Spread and Bull Put Spread are both bullish strategies, how do we decided which one we should use? Thanks for all you do =D

@jefffree6990 Жыл бұрын

Great stuff - would be great to have a P/L chart on the last couple FAQ's (showing where you end up with shares , where you end with fees )

@mono_onamoto 2 жыл бұрын

Thank you sir! Very good content

@ytspangler 2 жыл бұрын

Very easy to understand, tks.

@architgupta6037 4 жыл бұрын

Thanks, very nice explanation.

@projectfinance 4 жыл бұрын

Thanks for watching!

@shubhamjadhav972 3 жыл бұрын

Valuable content 😊 keep it up

@mahmoudkchaou1799 3 жыл бұрын

Could you show us an example with commission and interests (paid for shorting a put overnight)? And if possible to construct a probability density function of the stock using some model (knowing the stock price at t=0) and calculate the expectancy of the portfolio. Thank you very much and I appreciate your video.

@signalbord 3 жыл бұрын

Do you have delta targets you typically aim for when selecting strike prices for your short put spreads?

@josephjames2599 3 жыл бұрын

Great video!

@SureshP-ug1ei 3 жыл бұрын

Very Good Content. Thank You Very Much

@genericwannabe 4 жыл бұрын

In example #1 where the bull put spread expires well above the either strike price. Is it safer to let both options expire for maximum profit or to sell just before closing for "near maximum profit"? I've heard the risk of allowing both to expire is that one leg might be assigned/excercised while the other one expires. And then you are holding a bunch assets you don't want, which may lose value by opening the next day.

@Discovery_and_Change 11 ай бұрын

What if the stock goes below the first put, and you get put (obligated to buy), but the stock doesn't fall enough for YOU to put on others, and, because we used a spread we sold & bought more contracts than we actually have cash to buy so many shares of the puts we sold? Isn't that the real max loss scenario? (I'm new, so genuinely wondering)

@bill.Latham 2 жыл бұрын

Great video, so the Bull put spread is the same as a Long put vertical? Thank You

@markenelzele3779 3 жыл бұрын

Amazing explanation

@louisthompson1020 2 жыл бұрын

Great education lecture.

@abangamirul3688 4 жыл бұрын

hi bro, very helpful explanation on how the trade works. if we on position of this bull spread, can we close sell & put on different days?

@JK-vb9ps 3 жыл бұрын

Vertical spreads must have same expiration dates

@minie9337 4 жыл бұрын

very detail explaination. Thank you

@projectfinance 4 жыл бұрын

Glad it was helpful!

@donalddomingo674 Жыл бұрын

Best ever. Thanks

@bagalao77 3 жыл бұрын

@projectoption hey man, thanks for your work! question: in case a bull put spread gets exercised, the seller keeps the premium correct?

@nixodian 3 жыл бұрын

Best time todo? Up or down market? As notice put skew means buying otm put is expensive

@satriowicaksono8791 2 жыл бұрын

Hi, great channel. Just have a question, if both the puts are in the money and if I can sell the long put for less loss than max loss near expiry is it ok to let the short put be exercised? (this is etf option so it can only be exercised at the expiry date). I don't mind having a position and will do the wheel strategy on the exercised 100 shares Short put strike at $42 premium $4.15 and long put at 38 premium was at 2.64. I can sell the long put for say 3.30.

@solaninepong8412 3 жыл бұрын

Hi Chris, upon expiration, is it possible to get assigned by the OCC if you are $0.01 positive on Buy Put leg of the spread? I am new to option!

@MyNguyen-qp5zd 2 жыл бұрын

Thanks Chris for an insightful lesson. If both positions are in the money, should I exercise the long put or the broker will do it? Thanks.

@projectfinance 2 жыл бұрын

I wouldn't do anything. If both options are ITM, check the extrinsic value that exists on the short put. If it's close to zero, you may get assigned. If you do get assigned, you'll have +100 shares and +1 long put from your spread. You could then sell the 100 shares and long put to close the position. Or, you could exercise the long put if it's deep ITM, but I would NOT exercise the long put if it has lots of extrinsic value because you'd be burning money unnecessarily.

@stephengrant6316 3 жыл бұрын

How do we choose the strike of the options we buy? Is it the dollar value of the spread we can afford to lose?

@markforest7163 3 жыл бұрын

Hi Chris.I've been trading vertical put credit spreads and I want to track them on a spreadsheet. I created an Excel sheet that worked for a while but when the trade didn't work out I had to do rolls and in some cases I went into iron condors etc. My trading quickly outgrew my spreadsheet. Do you have any recommendations for a spreadsheet that will keep track of the profit and losses I am making on my trades?

@DuskSkullin 3 жыл бұрын

do you always let these expire? or would you close out before expiration usually?

@adityapatnaik6079 3 жыл бұрын

you are the best

@oscartrevino5201 4 жыл бұрын

Cool video!

@projectfinance 4 жыл бұрын

Thanks!

@rohitindurkar 4 жыл бұрын

Thanks Chris.

@projectfinance 4 жыл бұрын

You're welcome!

@kiflelk 3 жыл бұрын

What if the spread buyer exercises his option at day 38 or are you dealing with the Options Clearing Center and they are not allowed to do any exercising?

@BaccaratDegen 2 жыл бұрын

Love the videos. I would remind your viewers to avoid (pin) risk by closing your position before exp. Ever get caught holding the bag

@devilangel036 3 жыл бұрын

Few questions Mike: 1. Can I leave the spread to expire worthless without taking any steps? Will that affect my net credit? 2. I got a spread in my account now. Stock price: 530 500 buy 8.10 510 sell 11.42 Ned credit of 332. If I close my spread now it says cost of trade is $440. Which is a loss despite stock being above the strike prices

@kevinlue4756 2 жыл бұрын

Thanks

@cppoly 4 жыл бұрын

Chris thanks for the video. Question to you (this seemed to make sense when I thought about it). When selling a put spread, let's say early on (the first 5 days on 30 DTE) the spread loses most of it's value and you decide to buy back the short put. Would it make sense to keep the long put and not close this out? I would say in this case it's fair to assume the long put is not worth much anymore since it will be further out of the money. So by selling it, there wouldn't be much value here. In this scenario, you give yourself a chance to make money if the spread reverses course. What do you think?

@hillarypatriciaalvarez7707 3 жыл бұрын

Cheers for this, I've been looking for "what percentage of traders make money?" for a while now, and I think this has helped. Ever heard of - Consaac Dumbfounded Control - (do a google search ) ? It is a good exclusive guide for discovering how to master options trading without the normal expense. Ive heard some interesting things about it and my mate got amazing success with it.

@JK-vb9ps 3 жыл бұрын

Chris P, u suggested a good idea to leave the long put open. However the long put should have a low delta and the probability of it being ITM at /near expiration would be super low and it would expire worthless. Although the prem is small, and you're taking a punt here, if u had close it as well, u would have gotten something back since there is extrinsic value remaining. Just my humble opinion.

@domingoinvests9840 4 жыл бұрын

what program do you use to make your examples and text?

@gordonraddy 3 жыл бұрын

Hi there, again great video. I personally just confused why would someone go for a P&L Ratio of less than 2:1 with such a strategy? You mentioned this strategy has a win-rate of above 50% which is nice, given that proper TA was done. However, why would someone risk 4K to make 1.8K? Yes, you did minimize your risk, however, there is still potential that you might get hit big time. Could you elaborate on that please?

@lifeknow-science9275 5 жыл бұрын

Good job bro

@projectfinance 5 жыл бұрын

Thank you!

@TK-hw6jk 2 жыл бұрын

In the last FAQ what if u do not have enough $ to buy the 100 shares? Will the broker sell the shares automatically at the market price so u don't take ownership of the shares?

@RJ-ez4ne 3 жыл бұрын

what are the steps of exiting the Put Credit Spreads? TIA.

@munster1404 2 жыл бұрын

Is it possible to experience early assignment before day 38 once the short put becomes ITM?

@Mann-qn7fr 3 жыл бұрын

Chris you are an awesome i would like to learn in person any chances? 😊

@markschellhammer4663 3 жыл бұрын

Would have been nice to have a brief explanation of managing a loss situation at, say, 2X premium, rather than only showing what happens when both strikes expire ITM and Max Loss occurs.

@tonysoprano1454 3 жыл бұрын

Is there a difference between a call debit and a put credit?

@manuelguerrero9917 Жыл бұрын

Do you a course on how to read the chart ? I mean I know it's impossible to know if the stock price is going up or down, but I know that if you know how to read the market, at least you would have an idea.

@jjseandxcefree 2 жыл бұрын

So you prefer put spreads of cash secured puts?

@amoljadhao9676 2 жыл бұрын

great video;may be show strategy to exit the trade

@rashmipatel4602 3 жыл бұрын

Your content is very well put together!!

@uangku60 3 жыл бұрын

How to close bull put if stock decrease and buyer swll the stock ? And how to clisw buy put .? Waiting expired ? Thanks

@LudwigRomero 3 жыл бұрын

so always close your spreads if in the money?

@ashr2025 4 жыл бұрын

Thank you for all your videos. Your explanation is so simple for beginners like me to follow. Can you please make a video on how to choose the right trades for bull put spread?

@lineage13 3 жыл бұрын

So Bull Call Spreads are very similar to trading Forex but with max losses?

@fooling6373 Жыл бұрын

outstanding

@projectfinance Жыл бұрын

Thank you!

@loudrockacdc 3 жыл бұрын

Wait, so you need to own a put previously so you can sell it right?

@happyhamster1411 Жыл бұрын

Are there any adjustments you would make for doing this weekly?

@awolfe9069 4 жыл бұрын

What happens if the buyer of your sold put exercises his option? Does this trigger your bought option to automatically sell at ask price locking in the current loss?

@projectfinance 4 жыл бұрын

You will buy 100 shares of stock at the short put's strike price. You'll still have the long put, so your downside risk is completely covered, but you'll still be able to lose the initial max loss potential of the spread. Getting assigned doesn't change your risk profile, it just changes the structure of your position.

@breezecatcher100 4 жыл бұрын

Do you have to close both legs of the trade?..can you buy the short position back and leave the second position open til expiration?

@projectfinance 4 жыл бұрын

You can close one part of the trade, but I wouldn't recommend it.

@wwaysup 4 жыл бұрын

amazing content, so clear and easy to follow without going to sleep. Thank you

@projectfinance 4 жыл бұрын

Thanks for the comment! I'm glad you found the video helpful and not too boring haha

@hussainmohdamin 3 жыл бұрын

power!

@Silvertestrun Жыл бұрын

@projectfinance Жыл бұрын

@AS-bm6vs 4 жыл бұрын

can i modify srtikes chain upside down so that strike prices will be increasing as we ascend not the opposite using tastyworks because its always confuses me

@projectfinance 4 жыл бұрын

No, you cannot change it unfortunately.

@drfb7012 4 жыл бұрын

Nice educative video.....

@projectfinance 4 жыл бұрын

Thanks for watching

@ocean4989 4 жыл бұрын

projectoption why sometimes will get max loss infinity??

@bigstef6637 4 жыл бұрын

I’ve watched several of you videos (even the 3 hour intro to options epic). Your work is very helpful. Why would a trader use a bull put spread vs the call spread? Is the level of certainty of stock price movement the deciding factor OR the certainty of a profit the deciding factor? Why would u chose one over the other?

@kvill2732 4 жыл бұрын

Can someone please answer this question? I was wondering the same thing. If you are bullish for a stock what are the benefits for a BULL PUT spread vs placing a BULL CALL spread? Thanks

@arupian666 4 жыл бұрын

@@kvill2732 If implied volatility is high (and therefore, so are options prices) you want to be a premium seller - bull put... if volatility is low (cheaper prices), be a buyer - bull call...

@user-jf7kz5kw6e 3 жыл бұрын

bull call spread is debit spread. whereas bull put spread's winning probability is very high my successful trader friends usually execute short put spread far OTM, hence his winning prob is really high (more than 80%)

@haydenhenderson5954 3 жыл бұрын

This is a very good question. My understanding is that with bull puts (as with bear calls) you receive a net credit. In both of these spreads, the stock price does not have to move at all, and can even move in the opposite direction slightly, and you will still turn a profit. A bull call spread usually requires a somewhat significant increase in the underlying stock price. Your max profit is much lower as a bull put spread than a bull call spread, but it is less risky.

@JK-vb9ps 3 жыл бұрын

Some good explanations provided already, will just add on to shed more light. Bull call spread - lower probability win rate since u only make money if stock price goes up. 1out of 3 possible scenarios. But higher profit potential. This is also a net debit spread so u come up with capital first. As an option buyer, time decay is also not on your side. Bull put spread - you are the option seller so this is a credit spread. You collect prem upfront instead. Higher probability win rate since stock price can go either up /sideways and you win. 2 out of 3 possible scenarios. Lower profit potential but balanced with a higher probability win rate. As an option seller, time decay is on your side. So depends on which is your preferred strategy.