Bull Put Spread

You receive credit because you take on an obligation - if FTSE falls below your short strike, your short put becomes valuable (to the buyer), and you must buy it back for more than you sold it. Your long put limits how much you can lose, but you can still lose the spread width minus your credit.

You lose money, but not the maximum. For example, if your spread is 7,600/7,400 and FTSE expires at 7,500, your short put is worth 100 points ITM, your long put is worthless. Your loss is 100 minus your credit. It's a partial loss.

Yes, for UK equity options which are physically settled. If your short put is deep ITM, the buyer might exercise early, forcing you to buy shares. However, FTSE 100 index options are cash-settled - no physical assignment. For most beginners, stick to FTSE 100 or spread betting to avoid assignment complexity.

A naked put has much higher risk - your loss is potentially the entire strike price minus premium (if the stock goes to zero). The long put in a Bull Put Spread caps your loss at the spread width. For a 200-point spread, your max loss is capped at ~£120-150 rather than potentially £7,400 for a naked 7,400 put.

30-45 DTE is optimal. This timeframe offers good premium collection while giving your trade time to work. Shorter expirations don't pay enough premium for the risk. Longer expirations tie up capital with minimal extra benefit.

Generally no. Even profitable spreads should be closed by 7-10 DTE due to gamma risk. If FTSE is far above your short strike, you might let it expire worthless, but closing at 50% profit and redeploying capital is usually better practice.

Use Bull Put Spread (credit) when IV is high (VFTSE > 20), you want time decay working for you, and you think the market will stay flat or rise. Use Bull Call Spread (debit) when IV is low, you expect a move higher, and you want limited risk with defined cost.

That's good! You have short vega - when IV drops, your spread value decreases, meaning you can buy it back cheaper for a profit. This is why entering at high IV is preferred - you benefit from both theta decay and vega crush.

To roll for a credit, the new spread must bring in more premium than the cost to close the old spread. This usually requires going to later expiration, lower strikes, or both. If you can't roll for a credit (or small debit), it's often better to just close and take the loss.

Yes. You can convert to a put butterfly by selling a put at the current price (creating a butterfly shape). You can also add a Bear Call Spread above to create an Iron Condor. However, these add complexity - sometimes simply closing is the best choice.

Put skew means OTM puts have elevated IV. Check the IV at your potential short strike versus ATM - if skew is steep, you're selling expensive puts which is advantageous. If skew is flat, the premium advantage is reduced. Also compare the IV you're selling (short put) versus buying (long put).

Keep aggregate portfolio delta below 0.20-0.30 of portfolio notional. For a £50,000 account, this means total delta exposure shouldn't exceed the equivalent of being long 10,000-15,000 index points worth. This limits downside in a crash scenario.

For UK equity options, early assignment risk increases as you approach ex-dividend dates or when puts go deep ITM. Monitor puts that are ITM by more than the remaining time value - these have highest assignment risk. Close or roll before this situation develops. Or simply use FTSE 100 index options which are cash-settled.

The sweet spot is VFTSE 22-28. Below 18 doesn't offer enough premium. Above 30 means extreme fear - the premium is great but the risk of continued selling is high. At 22-28, you're selling elevated premium while fear is manageable. Wait for stabilisation at support before entering.

Treat correlated underlyings as a single risk unit. BP, Shell, and FTSE 100 all move together - don't have Bull Put Spreads on all three. Diversify across uncorrelated sectors/indices. Monitor aggregate delta daily. Keep 50%+ of capital free for adjustments or new opportunities when IV spikes.