A put credit spread is a defined-risk options strategy: sell a put at one strike and buy a put at a lower strike as protection, collecting a net credit up front. The maximum loss is capped at the width between strikes minus the credit received.
How does a put credit spread make money?
Placeholder mechanics: profits if the underlying stays above the short strike through expiration; the position can be closed early for a partial profit.
What is the max loss?
Placeholder formula and a worked example using round numbers.
How is this different from a naked put?
Placeholder comparison: defined vs. undefined risk and the buying-power difference.
Frequently asked questions
What is a put credit spread?
A put credit spread is a defined-risk options strategy: sell a put at one strike and buy a put at a lower strike for protection, collecting a net credit.
What is the max loss on a put credit spread?
Placeholder formula: the difference between strikes, minus the credit received, times the number of contracts times 100.