Bull Put Spread

Psychology:

The bull put spread is like the bear call spread in that both are a credit trade and that is your maximum reward. The bull put spread involves selling a put and then buying a further out-of-the-money put for protection. The bull put spread should be initiated with front-month option contracts as time (Theta) is working for you as it erodes the extrinisic value of the options each day.

Risk / Reward:

Maximum Loss: Limited to the outcome of subtracting the total premium obtained for the option contract from the difference of the two exercise prices.

Maximum Gain: Limited to the total credit obtained for the spread.