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Adjusting The Bear Put Spread
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Module 6.2
Adjusting The Bear Put Spread
LP
SP
Module 6.2
Adjusting The Bear Put Spread
Adjustment for Bullish Move
Open the Trade Expecting
Strong Bearish Movement
Stock price reverses direction
and moves Bullish.
LP Roll our short puts in and up to
create a bull put calendar, or
SP straight up to create a bull put
spread.
Module 6.2
Adjusting The Bear Put Spread
LP
SP
Module 6.2
Adjusting The Bear Put Spread
Never forget your
cost basis.
Money in; money
out.
Buy to close the
Oct13 $77.50 for
$0.59.
Sell to open the
Sep13 $82.50 for
$0.64.
Spend $0.59 to
close, and take in
$0.64 to open.
Our cost basis
goes down by
$0.05 per share.
Module 6.2
Never forget your cost basis. Adjusting The Bear Put Spread
Money in; money out. Never forget your
Buy to close the Oct13 $77.50 for $0.59. cost basis.
Sell to open the Sep13 $85.00 for $1.76. Money in; money
Spend $0.59 to close, and take in $1.76 to open. out.
Our cost basis goes down by $1.17 per share. Buy to close the
Oct13 $77.50 for
$0.59.
Sell to open the
Oct13 $87.50 for
$4.75.
Spend $0.59 to
close, and take in
$4.75 to open.
Our cost basis goes
down by $4.16 per
share.
Module 6.2
Adjusting The Bear Put Spread
Summary
1. When a stock on a bear put spread moves in a slow bearish to
stagnant trend, we can:
1. Roll our short put in or up, or both.
2. Short additional puts after our first set of short puts expires worthless.
2. When a stock on a bear put spread moves into a bullish trend, we
can:
1. Roll our short put in and up to a higher strike than our long put creating a
bull put calendar.
2. Roll our short put straight up to a higher strike in the same month of
expiration, creating a bull put spread.
3. Always keep track of our cost basis and how it changes as we roll
the option.