A vertical put spread is an options trading strategy involving the simultaneous purchase and sale of two put options on the same underlying asset with the same expiration date but different strike prices. This strategy is typically employed when a trader holds a moderately bearish or bullish outlook on the underlying asset. In crypto options trading, it offers a structured approach to gaining directional exposure or generating premium with defined risk and reward profiles.
Mechanism
The mechanism of a vertical put spread functions by combining a long put and a short put. For a bear put spread, an investor buys a put with a higher strike price and sells a put with a lower strike price. Conversely, a bull put spread involves selling a higher strike put and buying a lower strike put. The net premium received or paid, and the difference in strike prices, define the maximum profit and loss potential.
Methodology
The methodology for deploying a vertical put spread involves selecting appropriate strike prices and expiration dates based on the investor’s price expectations and risk
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