Put Backspread

Description

Selling few ATM Puts and buying more OTM Puts.

Trading Logic

A volatility strategy betting on a massive crash.

Practical Example

Stock at $100. Sell 1 $100P, buy 2 $90P. Net debit: $2.

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P/L Curve

Chart Description
  • X-Axis: Stock price at expiration
  • Y-Axis: Expected P/L ($)
  • Green area: Profit; Red area: Loss