Credit spreads
Bull put spread
Sell an out-of-the-money put, buy a further out-of-the-money put.
Index goes upOpens for a creditTraded options beforeLoss capped
How it works
A bet that the index will not fall below the strike you sold. You keep the credit if it holds up, and the bought put limits what happens if it does not. Unlike buying a call, this makes money even if the index simply goes nowhere.
What it costs you when you are wrong
Capped at the gap between the strikes minus the credit. That is usually several times what you collected, so the arithmetic only works if you are right far more often than you are wrong.
The position
- 1Sell the put 2 strikes out of the money
- 2Buy the put 5 strikes out of the money
- Enter
- 4 trading days before expiry
- Exit
- hold to expiry
- Legs
- 2
Test it yourself
This runs against real historical market data. Nothing is uploaded, nothing is stored, and the result is not a prediction — it is what this rule would have done, on that index, in that year, with the costs shown.