The Bull Put - A Beautiful Credit Trade

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).


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