Name: Bull Put Spread or Vertical Spread
Setup: Buy (long) Strike A put and Sell (short) Strike B put
Bias: Neutral to Bullish
Break-Even: Strike B – credit received
Max Profit: Limited: Credit received
Max Loss: Limited: Strike A – Strike B – Credit received
Margin: Margin equal the Max Loss: Strike A – Strike B – Credit received
Time Decay: Time decay is a positive effect. You are looking for both sides of your spread to expire worthless.
Implied Volatility: The effect of implied volatility depends on where the underlying is in relation to the strikes. If the underlying is trading near the short put then you want implied volatility to decrease. If the underlying is near the long put then you want the implied volatility to increase.
Notes: None at this time
Featured in Trade Review: None at this time