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