Short Put Spread (Bull Put Spread)

A bullish option strategy which involves purchasing one put option while simultaneously selling another put option with a higher strike price with the same expiration date.  The Risk of the trade is the spread between the long strike and the short strike, less the credit received for that trade.

For example, a $SPY purchase in Feb with the market at $205, and selling a 1SD out-of-the-money (OTM), and buying a put $5 lower, would yield $.55.  The risk is $5 – $.55, or $4.45.  The Return on Capital is $.55 divided by $4.45 or 12.36% for approximately 60 days.

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