# What is an options put spread

Retrieved from " https: Keep in mind this requirement is on a per-unit basis. All investments involve risk, losses may exceed the principal invested, and the past performance of a security, industry, sector, market, or financial product does not guarantee future results or returns.

There is no guarantee that the forecasts of implied volatility or the Greeks will be correct. You may wish to consider buying a shorter-term long put spread, e. Ally Invest Margin Requirement Margin requirement is the difference between the strike prices. For example, a January box consists of:.

This strategy is an alternative to buying a long put. Use the Technical Analysis Tool to look for bullish indicators. Of course, this depends on the underlying stock and market conditions such as implied volatility. However, the further out-of-the-money the strike price is, the lower the net credit received will be from this spread.

When implied volatility is unusually high e. April Learn how and when to remove this template message. The three main classes of spreads are the horizontal spread, the vertical spread and the diagonal spread.

If your forecast was incorrect and the stock price is what is an options put spread or above strike B, you want implied volatility to increase for two reasons. Options Guy's Tips One advantage of this strategy is that you want both options to expire worthless. One advantage of this strategy is that you want both options to expire worthless. Implied Volatility After the strategy is established, the effect of implied volatility depends on where the stock is relative to your strike prices. Break-even at Expiration Strike B minus the net credit received when selling the spread.

When more options are written than purchased, it is a ratio spread. You may wish to consider ensuring that strike B is around one standard deviation out-of-the-money at initiation. For more information, please review the Characteristics and Risks of Standardized Options brochure before you begin trading options. Multiple leg options strategies involve additional risksand what is an options put spread result in complex tax treatments. A box spread consists of a bull call spread and a bear put spread.

This article needs additional citations for verification. That will increase your probability of success. Please consult a tax professional prior to implementing these strategies. Energy derivative Freight derivative Inflation derivative Property derivative Weather derivative. You want the stock to be at or above strike B at expiration, so both options will expire worthless.

That ultimately limits your risk. There is no guarantee that the forecasts of implied volatility or the Greeks will be correct. Content, research, tools, and stock or option symbols are for educational and illustrative purposes only and do not imply a recommendation or solicitation to buy or sell a particular security or to engage in any particular investment strategy.

This strategy is an alternative to buying a long put. Please consult a tax professional prior to implementing these strategies. When more options are written than purchased, it is a ratio spread. All investments involve risk, losses may exceed the principal invested, and the past performance what is an options put spread a security, industry, sector, market, or financial product does not guarantee future results or returns. First, it will increase the value of the near-the-money option you bought faster than the in-the-money option you sold, thereby decreasing the overall value of the spread.