A credit spread strategy known as a bull put spread offers traders all the benefits of put selling while taking on less risk. To initiate a bull put spread, the trader sells a put option and simultaneously purchases another put option on the same underlying asset with the same expiration date but a lower strike price. A net credit is collected, and while you generate less income than you would by selling a put alone, the purchased put acts as insurance against big losses.#-ad_banner-# Today, I want… Read More
A credit spread strategy known as a bull put spread offers traders all the benefits of put selling while taking on less risk. To initiate a bull put spread, the trader sells a put option and simultaneously purchases another put option on the same underlying asset with the same expiration date but a lower strike price. A net credit is collected, and while you generate less income than you would by selling a put alone, the purchased put acts as insurance against big losses.#-ad_banner-# Today, I want to look at a specific bull put spread trade in Yahoo (Nasdaq: YHOO). Because we may be obligated to buy shares of the underlying stock or ETF with this strategy, it is important that we are quite willing to own the shares at the strike price of the put being sold. Therefore, I’ll take a moment to discuss why I am bullish on YHOO. Yahoo owns a 23% stake in Chinese e-commerce company Alibaba, which filed for an initial public offering this week that could turn out to be one of the biggest in history. Alibaba handles more online transactions… Read More