Long Put Spread & Short Call


Buy a Put Option Spread & Sell a Call Option

Margin Requirement

Yes, pay premium difference in premiums and post variable margin on the call similar to futures in a rising market


  • Establishes a Range of Protection from lower prices
  • Some benefit to higher prices
  • Cost is reduced by selling both call & put
  • Flexible, offset at any time
  • Least expensive option strategy alternative


  • Limited benefit from higher futures price (to call’s strike price)
  • Protection limited to the lower put strike plus the net cost
  • Offsetting before expiration will change the cost & P/L (disadvantage in both a lower and higher market)

When to Apply

  • If market outlook is neutral or perceived risk to lower and higher prices is balanced
  • If minimum cost in strategy selection is a priority
  • If unlimited protection from lower prices is unnecessary AND potential short futures position above the market is acceptable
  • In a high volatility environment historically and/or seasonally

Potential Adjustment

  • In a rising market, buy back short put option to capture decay in premium, roll up short call option to extend opportunity to participate in higher prices, and/or roll up long put option to capture benefit from increase in price
  • In a falling market, buy back short call option to capture decay in premium, roll down short put option to extend range of protection to lower prices and/or roll down long put option to capture gain from drop in price