Front Spread w/ Puts

Name: Front Spread w/ Puts

Setup: Sell (short) 2 Strike A puts and Buy (long) Strike B put – contracts will have the same expiration

Bias: Neutral to Slightly Bearish

 

Break-Even: Strike A – Max Profit

 

Max Profit: Limited: Strike A – Strike B + Credit received

Max Loss: Limited: Capped if the stock goes to $0.00

Margin: Margin equals the requirement for the short put

Time Decay: Time decay is a positive effect.  As time goes on it will lower the value of your long put but also lower the value of your short puts which outweigh the long

Implied Volatility: After the play is put on you want volatility to decrease as it will have a greater positive effect on the short puts

Notes: None at this time

Featured in Trade Review: None at this time