What is a bull put? 🤔

Good morning and TGIF!

I’m 2 cups of coffee in, writing this lesson in my bath robe.

Over the next week, I will teach you the $2,000 Small Account Journey strategy.

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Options act like insurance for stocks.

A call option is bullish.

A put option is bearish.

Like your car or home insurance, there’s an expiration date. For options, it tends to be every Friday.

If XYZ stock is trading at $100 and we buy the $110 call for $3, we need $113 to breakeven at Friday’s expiration.

$110 is 10% higher than the $100 stock price. Therefore, it’s called out-of-the-money call options.

So what’s an in-the-money call option? If we bought the $90 calls because they are already $10 in-the-money. Stock price is $100. Call option we’re buying is $90. There’s $10 of intrinsic value. These call options trade for $13.

In-the-money call options are less risky. This is because they have intrinsic value ($10) and extrinsic value ($3). Stock is trading at $100, and we bought the $90 call options for $13. What makes up the $3? Time and implied volatility — like your car insurance.

You pay $100 to Geico on the 1st of the month, and it decays toward $0. How did they decide to charge you $100? Time and implied volatility — your driving record.

Out-of-the-money call options are riskier because they have no intrinsic value. No “TRUE” value. In the example where we buy the $110 calls for $3, the $3 consists of time and implied volatility.

If the stock price does not get to $113 by Friday, those $3 call options expire at $0.

If you avoid a car accident for the month, your $100 decays due to time passing by. The premium goes to $0 and you pay another premium to keep your policy.

Gamblers prefer the $3 call option because it seems cheaper.

But I assure you it is more expensive.

The probability of the $100 stock making a 10% move by Friday to $110 is low. Plus, they paid $3 so they need $113 breakeven. So to make 100% profit on that trade they need $116 or a 16% move on the stock by Friday.

Odds of that happening can be very low, like under 10% low.

What I wrote above is true for put options, it would be the opposite. Stock is at $100, trader buys $90 puts options out-of-the-money for $3. Low probability trade. Trader needs $87 to breakeven by Friday. Trader needs $84 to make 100%.

$110 put options on that $100 stock are in-the-money by $10. We’ll add $3 for time and implied volatility, making the $110 put options cost $13.

Out-of-the-money call or put options seem “cheaper,” but they are more expensive. This is because they have very low probability of making any money. Most of them expire worthless.

So what’s a bull put?

And how do traders make this high-probability trade with as little as a $2,000 account?

We now know that out-of-the-money call or put options have a low chance of making money.

I know I’m not your typical Wall Street guy. I was a schoolteacher for a decade.

So here’s some proof.

Okay, now that the experts agree, let’s continue.

The easiest way I can explain this is by showing you a trade I made this week.

Here’s the text message I sent to subscribers using the RagingBull APP.

Steps:

1. I focus on earnings winners with strong guidance like SPOT

2. I plot the 10-day EMA (green line) because algos often buy there

3. I SELL an out-of-the-money put BELOW the price of the stock (-$485 or red line)

4. And BUY and out-of-the-money put BELOW that (+$480 or green line)

5. Hence -$485 / +$480 seen in the alert above

6. I look for 30-40% of the width of the spread ($5) so $1.50 - $2 entry

7. My entry was $2.05 as you can see above, about 40% of the $5 wide spread

8. If the stock trades a little lower, but above $485, I can make 100%

9. If the stock trades sideways, I can make 100%

10. If the stock heads higher, like it did, I can make money very fast. That’s because those out-of-the-money put options decay quickly.

Read that through a few times; it will start to make sense.

I know what you’re thinking. Why not only sell the $485 put? Why did Jason buy the $480 put? Traders refer to the -$485 / +$480 spread for $2.05 entry as a bull put or a short put vertical spread. It’s a neutral to bearish trade. Most important, it’s a defined risk trade.

Buying the $480 put, in case the stock crashes, caps my losses at $480. I can only lose what I risked and that helps me sleep at night.

Say Joe Rogan left Spotify, the stock would crash below $480.

My out-of-the-money puts would kick in and make money. They were a defensive measure to offset the $485 puts I sold.

Make sense?

In this example I risked $3,000 to make $2,000 and made $1,700 of the $2,000 overnight.

So if the stock crashed below $480 and stayed there, the worst I could do is lose $3,000.

But is Joe Rogan going to leave Spotify?

You saw the Trump interview — so did the world. Rogan isn’t going anywhere.

And that’s how I made 83% or $1,700 overnight.

And I’m up 202% on a $2,000 balance, to $6,044, which I started on December 3 — or 52 days ago.

See for yourself.

The strategy is good accounts under $25,000 which aren’t allowed to day trade more than 3 times in a week.

The goal is to capture the time decay of the put options.

Do this on earnings winners with strong guidance at or below the 10-day EMA, and the probability goes up.

So swing trading is my focus — though some win the same day.

Take SPOT, NFLX, COST, APP, SHOP etc., and plot the 10-day EMA and repeat the process as much as possible.

Losses will happen. But win streaks should offset them.

In fact, recently I won 69 straight trades over two months doing this. No joke.

So let’s talk about your learning how to do this.

I have some ambitious goals for myself as a trader across all my services — but those aren’t relevant to you. What you need to know is that, as a trader across all my services, I’m trying to get to $5,000 realized a day, and I’m not there yet.

I publish my results daily so you can always see how I’m doing with all my trading.

So what’s a good goal for a new subscriber?

1. Subscribe and receive my master cheat sheet immediately in your email

2. Read it for 3 days in a row (10 minutes a day)

3. Watch and listen to my morning calls (10 minutes a day)

4. Paper trade $2,000 and see if you can double it

5. Refine the process until you do — from there you will know what to do next

I’ve taught a lot of people how to trade this strategy, and it’s by far one of my favorites.

If you’d like all my $2k SAJ trade alerts sent to your phone as I make these trades, I’m offering a 72% discount right now.

You’ll get my blueprint. A morning video. A morning watchlist. Real-time trade alerts. Access to my journal and existing/ongoing education.

Click here to learn more and subscribe.

And keep opening your email — I’ll provide a new lesson daily.

Sincerely,

Jason Bond

I want to point out that I cannot speak for my members’ performance, as results may not be typical and trading is HARD. And I cannot guarantee you will make money. But what I can guarantee is that I will work my BUTT OFF to teach you WHY I trade WHAT I trade.