How to Scan Opportunities for Bull Put Spread

ThinkorSwim is a second to none trading platform. It took me so long to get a hand on it. I had a chance to learn more about how to scan Bull Put Spread on that platform on this site: http://growithyou.hubpages.com.

About the first option, the ThinkorSwim Trading Platform provides you with two powerful tools in the Scan tab of its desktop software: the Stock Hacker and the Spread Hacker. You can use these two sections to literally scan thousands of stocks or options spreads in a few seconds.

To find a Bull Put Spread in ThinkorSwim, choose a Public List (e.g. SP500) and set the Spread Hacker as follows:

On the top, click on the menu Search and select “Vertical”.

1. First Criteria – Days to expiration

You are interested in trading options that are about to expire within 30 days or less in order to benefit from the effect of time decay. Type in the min field 15 and in the max field 30.

2. Second Criteria - Front Vol

You are interested in selling a options (with expiration date at roughly 30 days) with high volatility. You should set the front vol at min 30%, because you are selling and you want to receive a huge credit.

For any position detected from the computer, remember to check that the option purchased must have lower volatility than the one sold.

Then you can set some optional criteria to make your search suits your trading plan.

3. Third Criteria - Underlying Price

You may feel more comfortable either trading stocks with high or low price levels. For instance, if you prefer high priced underlying, type in the min field 40 and in the max field 100.

4. Fourth Criteria - PL/Margin

According to the cash available in your account and your money management, you may prefer placing a trade whose margin is within a certain amount. For instance, if the maximum margin you can afford for trade is $2000, type in the max field 2000.

Happy Trading!

Analyze Stock Charts for Bull Put Spread

In order to take advantage of this strategy, you are not going to try to predict where the market or a stock will go to in a short time frame, usually within thirty days or sixty day maximum, but where the market likyly WILL NOT GO TO in that allotted time frame. With this approach, you will have more than one way to win. When you sell options, your only concern is for the market to not go past the OTM options strike that you are short. That is paramount important in this Bull Put Spread strategy. When you sell an OTM options, or OTM option spread, you can win in three different market scenarios as opposed to the buyer only having one winning scenario.

A Bull Put Spread is definitely a bullish strategy. As a result, when you look at a stock chart, you must definitely take into consideration the trend of the underlying security. To place a successful trade, you want the stock either moves up or doesn’t move at all. For this reason, it is vitally important to place this trade in correspondence of a strong point of support. What I recommend is to scan stocks and pick the ones which are being traded close to a point of support previously detected. Then, try to place your Bull Put Spread by selling the OTM strike that is roughly at the same level of that support point or a few point lower as a safer bet and buying a further OTM strike.

Before placing a trade, make sure that there is no significant macro or micro market-moving news or earnings release until the expiration of your options.

Here is an example that I will use Bull Put Spread to earn some income on Google (NASDAQ:GOOG).

... (to be continued)