The short put spreads obligate you to sell the stock at Leg 2 if the option is assigned but give you the right to sell stock at Leg 1.
Alias
Short Put Spread, Vertical Spread
Details
A risk-reward-balanced bullish vertical spread approach. It is used when the trader expects the price of the underlying security to rise. It involves selling put options on the security at a certain strike price and simultaneously buying put options on the same security at a lower strike price. The trader profits if the price of the underlying security rises above the strike price of the short put option.
The short put spreads obligate you to sell the stock at Leg 2 if the option is assigned but give you the right to sell stock at Leg 1.
Breakeven
Leg 2 minus the net credit received
Sweet Spot
Stock price to be at or above the Leg2 at expiration, so both options expire worthless.
Max Profit
Profit is limited to the net credit received at the time of the opening option.
Max Loss
Limited Risk to the difference between Leg 1 and Leg 2, minus the net credit received.
Unleash the full potential of your options strategies with our powerful options trading mobile app. Download it now and start making smarter investment decisions on the go