GDX Bull Put Spread Example

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The trader first talks through his proprietary method of looking at stock charts.  Once he walks through the basics, he reviews the chart of the GDX and talks about why he sees it as a great candidate for the bull put spread.  This trader looks for a long setup in the charts and identifies his stop level on the chart.  The trader first talks through his proprietary method of looking at stock charts.  Once he walks through the basics, he reviews the chart of the GDX and talks about why he sees it as a great candidate for the bull put spread.  This trader looks for a long setup in the charts and identifies his stop level on the chart.  This stop level is the price at which, if broken, will change the bias of the trader on this position from bull to bear. 

This stop level is where he will short the put in this spread strategy.  The long end, or long put option, will be purchased a few points out of the money, and this will create a net credit on initiation of this trade.  Remember, the expectation is that the stock moves higher and that both options expire worthless.  The maximum risk in this trade is equal to the difference in the strike price of the two options minus the net credit received to put the trade on. 

He covers the risk/reward ratio of this trade and compares the bull put spread against the butterfly spread options strategy

Tim Ord
Ord Oracle

Tim Ord is a technical analyst and expert in the theories of chart analysis using price, volume, and a host of proprietary indicators as a guide...

Tradingsim.com
Day Trading Simulator

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