Bull Put Spreads
The Bull Put spread is a bullish strategy that involves the following steps:
Step 1. | Buy lower strike put.
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Step 2. | Sell higher strike put with the same expiration date.
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The lower strike puts will be cheaper than the higher strike puts because they are further OTM, so this will be a net credit transaction, that is, you will receive funds into your account for placing this trade, but your broker will require sufficient funds in your account (margin) to cover the risk exposure of the trade.
As a net credit transaction, the Bull Put spread can be looked upon as an income strategy on a monthly basis. You also can use a Bull Put spread in the same way that you use a Bull Call spread, for example, over the long term. The only problem ...
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