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Bull Put Spread
bullishBull Put Spread is a bullish income strategy that could be executed when one expects the underlying to find support and inch higher
Example:
| Instrument | Qty | Price |
|---|---|---|
| BUY NIFTY 30-Jun-26 24100 PE | 65 | 108.2 |
| SELL NIFTY 30-Jun-26 25600 PE | 65 | 1517.9 |
When To Execute?
Bull Put spread is executed when we have bullish outlook in Stock/ Index. Lower strike put outflow is funded by higher strike in the money Put. It is a net credit strategy
Trade
Buy 1 lot ATM Put and Sell 1 lot 1 Deep ITM Put
Advantages
Helps to generate sustain income if the view goes correct
Can be used to repair loss making Long Put by selling higher ITM put
Develop Limited risk, limited reward strategy
Disadvantages
Identifying clear area of support and resistance is essential
If the stock closes below lower strike put, one can lose money
Maximum Profit
Maximum reward is limited to difference between two strikes i.e. net capital inflow. Maximum Profit arises if the stock closes at or above the higher strike put resulting in both the strike ending worthless and you pocket entire initial inflow
Maximum Loss
Maximum risk is difference between both the strikes less credit inflow received initially. Maximum loss arises when stock closes below lower strike put