Options involve risks and are not suitable for all investors. Before trading, read the Options Disclosure Document:
Trading options can be risky, but there are strategies you can build to define your risk and your reward, like the short put vertical, also known as the bull put spread, short put spread, credit put spread, among other names. This strategy is based on a pretty simple concept: Sell one put to potentially profit from a stock going up, but also buy another put at a different strike, which might provide some protection in case it doesn’t.
You can use this strategy to define your maximum gain and your maximum loss from the start. It’s a strategy that offers a lot of flexibility: You could potentially profit if the underlying moves up a lot, moves up a little, floats sideways, or even if it drops a bit. But you can still lose if the underlying stock’s price falls too far. There’s also the risk of unexpected exercise or assignment.
We’ll also walk through how to use our thinkorswim® web platform: trade.thinkorswim.com.
0:00 Introduction: Spread strategies
1:45 What is a short put vertical?
2:47 Why consider this strategy?
4:22 Short put vertical example
7:14 Greeks
8:27 Placing a trade
15:05 Managing short put verticals
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