Advantages of Bear Put Spread
- The loss is limited if the underlying share price falls instead of rises.
- If the share price fails to stay above the strike price of the sold put option, the profit yield will be greater than just buying call options.
- Able to profit even when the share price remains completely still.
- Lower risk than simply writing naked put options as maximum downside is limited by bought put option.
Disadvantages of Bull Put Spread
- There will be no more profits possible if the underlying asset rises beyond the strike price of the sold put option.
- Because it is a credit spread, there is a margin requirement in order to place the trade.
- As long as the sold put options remain in-the-money, there is a possibility of it being assigned. You may then have to purchase the underlying stock to meet the sold put obligation.
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