So the next question is how effective is a bull put spread. Can someone offer a real life example of: Actual max lost from a bull put spread trade when the trade gone real bad
If any of you have ever read Market Wizards the option trader they interview made most of his money off of buying butterflies and then purchasing deep OTM calls and puts for protection against a huge move against his butterfly......seems like this would be a pretty good stratagy to focus on but maybe not.
The actual max loss is equal to the difference between the strikes less premium received. This is in fantasy world as well as real world!
answered you this allready: you just exercise the put you are long or you sell the stock and sell the put. Get yourself a few good books on options, it's obvious you don't get it, that's not a disgrace, but time to do something about that.
Cottle also talks about something similar called slingshots with extra calls or puts added to the wings.
I can see someone using this in a highly volatile market -- protects against the rollercoaster moves. But I think there are better methods.
Just a suggestion. Get yourself an autotrader program and experiment with strategies that you like. I'd dare say that after about a month or so you'll find a profile/script or two that makes you happy. Then shift about $30k into an active account and study your results. I THINK YOU MIGHT ENJOY THE EXPERIMENT! Also, spend a few bucks on some reading materials to help you reinforce YOUR personal theories on trading. Become an expert on what you like and how you trade. Good luck and happy trading!