Long Put Spread


Buy a Put Option, Sell a Lower Strike Put Option

Margin Requirement

No, pay the difference in premiums


  • Establishes a Range of Protection from lower prices
  • Cost is reduced by selling lower strike put
  • Higher futures price may improve your selling price
  • Flexible, offset at any time and receive the remaining value


  • Premium paid in full at time of purchase
  • Protection is limited to the lower put strike plus the cost
  • Offsetting before expiration will change the cost & P/L (advantage in higher market, disadvantage in lower market)

When to Apply

  • If market outlook is bullish
  • If unlimited protection to lower prices is not necessary or if downside risk can be better defined or measured
  • If flexibility is needed to participate in all higher prices
  • If capital constraints require maximum pre-defined margin exposure
  • As an adjustment to a short future, long put or short collar position after a drop in price
  • If in a neutral implied volatility environment

Potential Adjustment

  • In a rising market, buy back short put option to capture decay in premium, roll up long put to capture increase in price and/or sell call option to create credit to help offset initial cost
  • In a falling market, roll down short put to a lower strike price to extend range of protection, roll down long put to capture gain from drop in price and/or sell call option to create credit or help offset