Today’s video compares the bear call and bear put spreads, using IWM as an example.
Bear Vertical Spreads
- Structure: Buy a higher strike option/Sell a lower strike option.
- Puts: Buy a higher strike put/sell a lower strike put = Debit spread = Bear Put Spreads. We use strikes BELOW the current stock price
Bear Put = Risk a little to make a lot, with a lower probability of profit
- Risk $3.5, Reward $6.50: 30% POP
- Calls: Buy a higher strike call/sell a lower strike call = Credit Spread = Bear Call Spreads. We use strikes ABOVE the current stock price
Bear Call= Risk a lot to make a little, with high probability of profit.
- Risk $9 Reward $1: 84% POP
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