Bull Put Spread Analyzer — The Compound Family

What is a Bull Put Spread?

A Bull Put Spread is an options income strategy where you sell a put at a higher strike and simultaneously buy a put at a lower strike — both with the same expiration date. You collect net premium upfront and profit if the stock stays above your sell strike at expiration.

MAX PROFIT

Net Premium × 100

Stock closes above sell strike

MAX LOSS

(Width − Premium) × 100

Stock closes below buy strike

BREAKEVEN

Sell Strike − Premium

Loss starts below this price

When to Use This Strategy

✓ Ideal Conditions

📈 Bullish or neutral market outlook
⚡ High IV Rank (50%+) — premium is expensive
📅 DTE 35–60 days — optimal theta decay
🏦 Strong company with clear support levels
📊 VIX below 30 — stable macro environment

✗ Avoid When

📉 Clearly bearish trend — stock breaking down
📢 Earnings within the period — avoid binary events
⚠️ VIX above 35 — too much systemic risk
📉 Low IV Rank (below 30%) — premium too cheap
💸 Margin > 5% of portfolio — concentration risk

How to Select Quality Companies — Reducing Risk

The single biggest risk reduction comes from stock selection. Only sell puts on companies you would genuinely want to own. This is the core principle of the Wheel strategy.

FUNDAMENTAL QUALITY

• ROE > 20% — strong returns on equity

• FCF Margin > 15% — generates real cash

• Debt/Equity < 0.5 — low leverage risk

• Gross Margin > 30% — pricing power

• Piotroski F-Score ≥ 6 — financial health

• Revenue growth consistent 3+ years

MARKET POSITION

• Large/Mega cap — NYSE or NASDAQ only

• Market leader in its sector (moat)

• Analyst consensus: Buy or Strong Buy

• Short Float < 10% — low short pressure

• Beta 0.7–2.0 — manageable volatility

• Sector ETF above SMA50 — sector health

TECHNICAL SETUP

• Stock price above SMA50 and SMA200

• Clear horizontal support at or near strike

• RSI not extremely overbought (>80)

• No major resistance directly above entry

• Volume confirming direction

• Place sell strike at or below support

EXAMPLES — QUALITY NAMES

✓ MSFT, AAPL, GOOGL — mega cap tech

✓ ASML, AMAT, LRCX — semis equipment

✓ NVDA (when IV high) — with tight spread

✓ AMZN, ANET, VEEV — cloud/software moat

✗ Meme stocks, biotech, micro caps

✗ Stocks near earnings announcement

Risk Management Rules

💰

Position sizing

Never exceed 5% of portfolio margin per position. Maximum 40% of total margin in one sector. This limits catastrophic loss from sector-wide moves.

🛑

Stop-loss rule

Close the position if loss reaches 100% of premium collected. Example: collected $300 premium → close if spread costs $600 to buy back. This limits max loss to ~$300, not the full $700.

🎯

Profit taking

Close at 50% of maximum profit. If you collected $300, close when spread is worth $150 to buy back. This frees up margin and reduces time in trade.

📅

DTE management

Enter at 35–60 DTE. Consider closing or rolling at 21 DTE to avoid gamma risk. Never hold through earnings unless using the Wheel strategy with full assignment readiness.

🔄

Rolling losing positions

If the stock approaches your sell strike, consider rolling down and out — move to a lower strike at a further expiry for a net credit. Only roll if the thesis is still intact.

Example Trade — LRCX

Lam Research trading at $260. IV Rank 66%. Selling a Bull Put Spread:

Sell 1x LRCX $260 Put @ $21.34 mid

Buy 1x LRCX $250 Put @ $16.55 mid

─────────────────────────────

Net Premium: $4.79 × 100 = $479 received

Max Loss: ($10 − $4.79) × 100 = $521

Breakeven: $260 − $4.79 = $255.21

Buffer: (260 − 255.21) / 260 = 1.8%

R:P: 521 / 479 = 1.09:1 ← Excellent

Ann. yield on margin: ~197% / year

⚠️ Educational example only. Not financial advice. Past results do not guarantee future performance. Always use the calculator and checklist before entering any trade.

Stock Parameters

Ticker

Current Stock Price ($)

IV Rank (52W) %

Implied Vol %

IV / Hist Vol %

Put/Call Interest

Opt Volume (contracts)

OI at Strike (contracts)

Spread Parameters

Sell Strike

Buy Strike

Sell Put Bid

Sell Put Ask

Buy Put Bid

Buy Put Ask

Delta (sell leg)

DTE (days to expiry)

IBKR Margin ($)

Earnings in period?

Wheel Filter (ready to hold shares)

Piotroski F-Score ≥ 6

Analyst Recom.: Buy+

Current Ratio ≥ 1.5

Short Float ≤ 5%

Price above SMA50

Strike at support

Thesis Killers noted

Cash available for shares

Portfolio Control

Portfolio Size ($)

VIX now

Fear & Greed Index

Open positions

Total margin used ($)

Bid/Ask spread (% of mid)

IBKR Options Metrics Reference

Metric	Ideal	Acceptable	Stop
52W IV Rank	50–80%	40–50%	< 40%
Implied Vol %	50–100%+	35–50%	< 30%
IV / Hist Vol	110–150%	100–110%	< 100%
Put/Call Interest	0.5–0.9	0.9–1.2	> 1.5
Put/Call Volume	0.5–0.8	0.8–1.2	> 1.5
Opt Volume	10K+	2K–10K	< 500
Open Interest (at strike)	500+	100–500	< 50
Bid/Ask option spread	< 5% mid	5–10%	> 15%
Delta (sell leg)	0.25–0.35	0.35–0.45	> 0.50
DTE	45–60 d	30–75 d	< 21 d

R:P Ratio Reference Table

R:P	Rating	When it occurs	Action
1:1 – 2:1	Excellent	ATM strikes, IV Rank 60%+, tight spread	Open immediately
2:1 – 5:1	Good	OTM delta 0.25–0.35, IV Rank 50%+	Open
5:1 – 10:1	Acceptableе	Deep OTM, IV Rank 40–50%	Top stocks only (MSFT, AAPL)
10:1 – 20:1	Poor	Far OTM strikes, low IV	Do not open
> 20:1	Stop	Naked put, IV very low	Use a spread

Formulas

NET PREMIUM = (Sell Bid + Sell Ask)/2 − (Buy Bid + Buy Ask)/2
BREAKEVEN = Sell Strike − Net Premium
BUFFER = (Price − Breakeven) / Price × 100%
MAX LOSS = (Width − Net Premium) × 100
R:P = Max Loss / (Net Premium × 100)
YIELD on margin (ann.) = Net Premium / Margin × (365 / DTE) × 100%

Pre-Trade Checklist (35 points)

Block A — Initial Screening (Finviz)

Block B — Options Metrics (IBKR)

Block C — Spread Parameters

Block D — Portfolio & Margin