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Bull Put Spread

$365.00 $299.00 / 12 months

Less than $1 per day

Description

bull put credit spread

The bull put spread, or sometimes called the bull put credit spread, is the most consistently profitable of our spread trading strategies.Inbacktests, it was profitable 58.62% of the time with an average annual return of 62.80%.

For our real money account the percent of winners from October, 2016 through November, 2017 is over 94.74% with a return of 145.34%.  There are a couple of reasons why it has been so good.

First, it’s a bullish trade and makes money quickly when the market goes up—and we’ve been in a bull market since the financial crisis bear market ended.  Second, we take profits quickly so there is less time for a market to reverse, and go against the trade.  So what is a bull put spread?

A bull put spread combines the sale of a put option with the purchase of a put option at a strike price below the strike of the one that was sold.  The put that is bought defines the risk in the trade.

The most that can be lost if the price of the underlying stock or ETF plummets, is the width of the spread.  For example:

Suppose the price of SPY (an ETF that tracks the S&P 500) is at 200.  We could sell a put at a strike of 195 and buy one at a strike of 190.  The most we could lose is the difference between the strikes or 5.00 x 100 or $500 for a one contract trade.  But since we receive a credit for the trade, the maximum loss is actually $500 less the amount of premium (aka credit) that we received.

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Since we might receive 1.00 of credit the possible loss is only $400.  However, we found through our backtesting that it was more profitable to take profits when you have them.  By taking profits at a certain percent of the premium received, the long-term profitability is greater than simply letting the trade go to expiration.

There are other results of our backtesting that need to be explained as well.  There are many ways to execute a bull put credit spread. How far out in time should you go (i.e. what expiration should I use)?  What strike prices should be used for the put sold and the put bought?  When should profits be taken?  When should a loss be taken?

What level of implied volatility is best for doing the trade-above a certain level the strategy works but below a certain level it does not?  Should one use monthly options or are weekly options OK to use? Which stocks or ETF’s should be used?

At Humanstartups.com, we have answered all of these questions.  We know of no other service or options educator that answers these questions for their clients.  Either they don’t know, or worse, they don’t want to tell their clients since that would be the end of the road.  Isn’t it better that the client continue to struggle to be profitable so that they will continue to invest in their “teacher”?

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