Learn the Put Credit Spread Options Strategy with in-depth explanations, trade examples, and platform demonstrations.
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==== Chapters ====
0:00 Intro (Video PDF Download in Description)
0:47 What is the Put Credit Spread Strategy?
1:37 Max Profit & Max Loss Explained
2:32 Put Credit Spread Risk Graph
5:20 When to Enter Put Credit Spreads? (Profitable Trade Example)
10:04 Short Put vs. Put Spread Risk Comparison
11:18 Why a Spread's Maximum Value is the Width of the Strikes?
12:50 Exercise & Assignment: In-the-Money Spread at Expiration
14:15 Strike Price Selection & Risk/Reward Analysis
19:10 Put Spread Setup for Small Accounts
19:47 Closing Trades Before Expiration
21:55 Leave Questions/Comments Below!
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===== Summary =====
In this video, we'll walk through the put credit spread options strategy. Other strategy names: the bull put spread, short put spread, or selling a put spread.
The strategy is constructed by shorting a put option and then buying another put option at a lower strike price and in the same expiration cycle.
The bull put spread has limited risk, which is the (width of the strikes - the entry credit) x 100. The strategy also has limited profit potential, which is the premium collected at entry (spread sale price x 100).
The strategy makes money so long as the stock price remains above the short put strike price, and loses money if the stock price decreases. It doesn't matter if the stock price is slightly below the spread or zero at expiration, the loss potential is the same.
Because of this, a put credit spread has significantly lower risk compared to selling naked put options. It's also a much more suitable strategy for small accounts due to the low-risk nature of selling narrow spreads (like a $1-wide spread).
In the video, I walk through numerous trade examples in IWM, and do a walkthrough of strike price selection and risk/reward analysis on tastytrade.
Watch the video all the way through to learn these key concepts quickly, and hopefully effectively with the explanations and accompanying visuals.
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