The Bull Put is a combination of a Short Put - a credit trade where you get paid to play, and the Long Put - which is your limiting instrument - your insurance that protects you from losing beyond that strike price.
Short Put Strike Price: $118
Long Put Strike Price: $117
Upon looking at this stock, we noticed the "alignment of the stars". The RSI was above 50, the 5 day EMA was crossing over the 20 day EMA, as was the MACD. All indicators of a bullish trend.
Let's take a look at the TradeCaddie trading card I emailed to myself. My Short Put strike price was is $118. This means that I am obligated to buy that stock if it stays below $118 at expiration. Because our research shows that the stock is bullish, so we believe that the stock price will be above $118 at expiration, and the trade will expire worthless.
So, in my next post, I will answer the following questions:
How much can I make?
How long will it take?
What is my risk?
What is my chance of success?
If you can't wait until then, you can find all of these answers in the TC Trading Card below!
How much can I make? For this trade, the amount you can make is what you sell the short put for, minus how much you paid for the long put (minus commission).