Hey guys, I am new to options and I'm finding myself mystified by something. I keep reading how a great way to make income in a bull market is by selling puts. I get that selling naked puts is somewhat risky (though not obvious that it's any more risky than just owning shares outright), so if I want to cap my risk, a bull put spread is the way to go. HOWEVER, every trade I try to set up in Thinkorswim shows a max loss that exceeds the max profit. Coming from the stock/futures world, regularly taking trades with unfavorable R/R is a cardinal sin. Here is an example: Sell April 145 puts for $18.20 Buy April 140 puts for $17.00 Max profit = $1,200 Max loss = $3,800 That's a 1/3 risk rward! I can widen the spread to up my reward, but obviously that ups my risk too. The only way this strategy cou
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From the strike differences and option value differences one can understand that current price of stock is significantly greater than put strike prices. Thus it is a high probability (about 75 %, guessed from spread prices) that this bull put spread will expire worthless and you will keep the premium.