Bull Put Spread | what is the bull put spread option strategy?

      •    Bull Put Spread is a strategy that must be devised when the investor is moderately bullish on the       market direction going up in the short-term.

•    A Bull Put Spread is formed by buying an “Out-of-the-Money Put Option” (lower strike) and selling an “In-the-Money Put Option” (higher strike). Both Put options must have the same underlying security and expiration month.

•    The concept is to protect the downside of a Put sold by buying a lower strike Put, which acts as insurance for the Put sold.

•    This strategy is equivalent to the Bull Call but is done to earn a net credit (premium) and collect an income.

•        Investor view: Moderately bullish on the Stock/ Index.

•        Risk: Limited.

•        Reward: Limited to the premium received.

•        Breakeven: Strike price of Short Put – premium received.

•        Illustration

•     E.g. Nifty is currently trading @ 15000. The investor is expecting the markets to rise from these levels. By selling a Put Option of Nifty having Strike 15100 @ premium 150 and buying a Put Option of Nifty having Strike 14900@ premium 50, the investor can get an inflow of the premium of 100 and benefit if Nifty stays above 15000.