New Trade – bull put spread

Stock Symbol: [private_monthly]JNJ[/private_monthly]

Price at time of Trade: $57.60
Target Price: $60 by Sep expiration

Option Strategy: bull put spread - generates a credit trade
Risk: low
Reward: limited

Reasoning:Expect that [private_monthly]JNJ [/private_monthly] will move up as high as $60 by September expiration, but will not dip lower than it's current level. Break even on this trade is at $57.75, which is just $0.15 or just 0.25% higher than its current level.

Max Risk: $550
Max Rewward: $450
Profit at $60 target: $450 = 82% gain

Trade Details:[private_monthly]

Buy 2 JNJ SEP10 55 PUT $0.23 $46.00
Sell -2 JNJ SEP10 60 PUT $2.48 ($496.00)

Cost/Proceeds ($450.00)
Option Requirement $1,000.00
Total Requirements $550.00
Estimated Commission $12.95




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  1. Robert J Krug says:

    Could the stock be put back to me by selling the 2 Sept sell puts? Thanks

  2. With a bull put spread, you’re selling puts that are either further in the money or closer to the money than the puts that you’re buying. Doing this does two things: 1) you create a credit in your account; and 2) the purchase of the puts limits your downside to the spread between the two strikes and “covers” the sale of the puts. Therefore, worst case scenario is that you’ll simply exercise your long puts in the event your short puts get exercised. This will not happen, however, until at or very near the option expiration date and we’ll have either taken our profits, or closed out the trade well before such time.

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