Options or option trading is a term used in an exchange market wherein an option is traded instead of stocks. There are so many ways to earn money and be successful in options trading. For example, you can use the bull put credit spread. This strategy is a bullish stance wherein you will want the price of the stock to remain higher than the upper strike price of the spread.
Normally, a credit spread includes writing an option, as well as buying an option in different strike prices that are in the similar underlying security. The position of the spread trade you have sold is the one responsible for giving you a credit going in your trading account. Then, the option you have bought acts to limit your risk.
Finally, when dealing with credit spread trades, you are typically collecting more money on the position that you have written. Definitely, you will want both options involved here in your spread to expire worthless in order for you to achieve maximum profits, and so you can keep the initial credit.
The bull put credit spread strategy is created for you to realize the profit through making cash, which is a net credit created by the difference in a sold put and a bought put. If the stocks are going up, you can keep the net credit.
How to do the bull put credit spread strategy? First, it involves the selling of a put. After that, you have to buy another put at a lower price than the selling price. This gives downside protection.
You should also know the maximum risk in this tactic; it can be calculated by getting the difference between the two strike prices and then deducting the net credit. In addition to that, you should also determine your maximum profit, which is known to be the net credit. You will only realize your profit if the option expires worthless.
Jeff Ziegler, author of this article is also interested in Credit spread options and recommends you to please check out some Credit spread strategies if you liked reading this information.
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