Reverse Bull Put Spread

Discussion in 'Options' started by oldtime, Aug 2, 2011.

  1. It's been kind of busy in beans during that last 24 hours. Luckily (and I DO MEAN LUCK) according to my broker I'm up.

    At any rate when I closed everything out I was left with a short put in the money with a high strike, and a long put OTM which apparently I put on for a credit.

    Does it make any sense to hold this spread? It's about BE.

    But more importantly, if you are ever bullish, does it ever make sense to sell an ITM put and buy an OTM put for a credit?
  2. I mean, the way I see it, since I'm ITM on the short put, every move up is just a loss on the long put, and every move down is just a gain on long put and a loss on the short put.

    There's still plenty of time left, but what I make on the short put I lose on the long put.

    The only thing that stopped me from closing it was that it was put on for a credit. And I figured I better think about it for a moment.

    Then I got to thinking, does this ever make sense?
  3. most people would probably use the call bull equivalent if they wanted that risk profile: +itm call / -otm call. in either case the deltas of each leg are not the same, so you won't see a dollar for dollar offset in either direction as you seem to think.
  4. yeah really, I can't see any reason to hold, but I thought I would just ask in case I'm missing something.

    And futhermore, I can't see why anyone would ever want to put this on in the first place.

    Although I must admit it makes me feel good when I see I have a credit (for a few minutes.)
  5. intrinsic value credits are other people's money, not yours.