4: Credit Put Spread (video)

Credit Put Spread

A Credit Put Spread, or Bull Put Spread, is a potential income strategy that sells a put, while simultaneously buying a lower strike put in the same expiration.

An investor with a somewhat Bullish view might use a Credit Put Spread when looking for a defined risk strategy that sees profits if a stock stays above a certain breakeven level.

The strategy might also be used instead of a Naked Put. Here, an investor may be willing to accept less potential income in exchange for limiting their downside risk.

Maximum Gain from the Credit Put Spread may be realized if the stock finishes above the spread, while losses may occur if the stock moves below the breakeven. A Maximum Loss would occur with the stock below the spread at expiration.

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