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Bull Put Spread Vs Covered Put (Married Put) Options Trading Strategy Comparison

Compare Bull Put Spread and Covered Put (Married Put) options trading strategies. Find similarities and differences between Bull Put Spread and Covered Put (Married Put) strategies. Find the best options trading strategy for your trading needs.

Bull Put Spread Vs Covered Put (Married Put)

  Bull Put Spread Covered Put (Married Put)
Bull Put Spread Logo Covered Put (Married Put) Logo
About Strategy A Bull Put Spread (or Bull Put Credit Spread) strategy is a Bullish strategy to be used when you're expecting the price of the underlying instrument to mildly rise or be less volatile. The strategy involves buying a Put Option and selling a Put Option at different strike prices. The risk and reward for this strategy is limited. A Bull Put Strategy involves Buy OTM Put Option and Sell ITM Put Option. For example, If you are of the view that the price of Reliance Shares will moderately gain or drop its volatility in near future. If Reliance is currently trading at Rs 600 then you will buy an OTM Put Option at Rs 700 and a sell an ITM Put Option at Rs 550. You will make a profit when, at expiry, Reliance closes at Rs 700 level and incur losse... Read More The Covered Put is a neutral to bearish market view and expects the price of the underlying to remain range bound or go down. In this strategy, while shorting shares (or futures), you also sell a Put Option (ATM or slight OTM) to cover for any unexpected rise in the price of the shares. This strategy is also known as Married Put strategy or writing covered put strategy. The risk is unlimited while the reward is limited in this strategy. How to use a Protective Call trading strategy? The usual Covered Put looks like as below for State Bank of India (SBI) Shares which are currently traded at Rs 275 (SBI Spot Price): Covered Put Orders - SBI Stock OrdersSBI Strike Price Sell Underlying SharesSell 100 SBI Shares ... Read More
Market View Bullish Bearish
Strategy Level Advance Advance
Options Type Put Put + Underlying
Number of Positions 2 2
Risk Profile Limited Unlimited
Reward Profile Limited Limited
Breakeven Point Strike price of short put - net premium paid Futures Price + Premium Received

When and how to use Bull Put Spread and Covered Put (Married Put)?

  Bull Put Spread Covered Put (Married Put)
When to use?

This strategy works well when you're of the view that the price of a particular underlying will rise, move sideways, or marginally fall.

The Covered Put works well when the market is moderately Bearish

Market View Bullish
When you are expecting a moderate rise in the price of the underlying or less volatility.
Bearish

When you are expecting a moderate drop in the price and volatility of the underlying.

Action
  • Buy OTM Put Option
  • Sell ITM Put Option

A Bull Put Strategy involves Buy OTM Put Option + Sell ITM Put Option.

For example, If you are of the view that the price of Reliance Shares will moderately gain or drop its volatility in near future. If Reliance is currently trading at 600 then you will buy a OTM PUT OPTION at 700 and a sell a ITM PUT OPTION at 550. You will make a profit when at expiry Reliance closes at 700 level and incur losses if the prices fall down below the current price.

Sell Underlying Sell OTM Put Option

Suppose SBI is trading at 300. You believe that the price will remain range bound or mildly drop. The covered put allows you to benefit from this market view. In this strategy, you sell the underlying and also sell a Put Option of the underlying and receive the premium. You will benefit from drop in prices of SBI, the Put Option will minimize your risks. If there is no change in price then you keep the premium received as profit.

Breakeven Point Strike price of short put - net premium paid
Futures Price + Premium Received

The break-even point is achieved when the price of the underlying is equal to the total of the sale price of underlying and premium received.

Compare Risks and Rewards (Bull Put Spread Vs Covered Put (Married Put))

  Bull Put Spread Covered Put (Married Put)
Risks Limited

Maximum loss occurs when the stock price moves below the lower strike price on expiration date.

Max Loss = (Strike Price Put 1 - Strike Price of Put 2) - Net Premium Received

Max Loss Occurs When Price of Underlying <= Strike Price of Long Put

Unlimited

The Maximum Loss is Unlimited as the price of the underlying can theoretically go up to any extent.

Loss = Price of Underlying - Sale Price of Underlying - Premium Received

Rewards Limited

Maximum profit happens when the price of the underlying moves above the strike price of Short Put on expiration date.

Max Profit = Net Premium Received

Limited

The maximum profit is limited to the premiums received. The profit happens when the price of the underlying moves above strike price of Short Put.

Maximum Profit Scenario

Both options unexercised

Underlying goes down and Options exercised

Maximum Loss Scenario

Both options exercised

Underlying goes up and Options exercised

Pros & Cons or Bull Put Spread and Covered Put (Married Put)

  Bull Put Spread Covered Put (Married Put)
Advantages

Allows you to benefit from time decay in profit situations. Helps you profit from 3 scenarios: rise, sideway movements and marginal fall of the underlying.

Its an income generation strategy in a neutral or Bearish market. Also allows you to benefit from fall in prices, range bound movements or mild increase.

Disadvantage

Limited profit. Time decay may go against you in loss situations.

The risks can be huge if the prices increases steeply.

Simillar Strategies Bull Call Spread, Bear Put Spread, Collar Bear Put Spread, Bear Call Spread