Put Verticals

A put vertical, also known as a vertical put spread, is an options trading strategy that involves simultaneously buying and selling put options with the same expiration date but different strike prices. This type of spreads have both a max lost and max profit meaning that managing the risk is very easy. As with all the other strategies I use, I will be using the credit version of this spread.

Opening

To open a put vertical credit spread, sell a OTM put and then buy another put at a lower strike price. Here’s how I usually open my trades:

For expiration below 2 weeks, I sell a put at 0.3 delta. This goes up to 0.4 delta for above 2 week expirations. Then I always buy at the strike right below the sell. This results in around a $110 - $125 credit with around a $350 max loss.

Managing

I don’t add any stop-losses for these spreads as data shows that it usually just closes winning positions early and I just manage my max loss and quantity as needed to adjust risk.

I add a take profit for 50% max profit that expires after half the DTE. This will result in the same or higher profit over time if it does end up triggering.