1. What it is
Buy one higher-strike put and sell one put at each of two lower strikes at a common expiration.
2. Why use it
Target a moderate decline while selling an additional lower put.
3. How the numbers work
View example
- Buy 1 × Put · Strike 100
- Sell 1 × Put · Strike 95
- Sell 1 × Put · Strike 90
All option legs have the same expiration.
- Option premium paid
- 1
- Expiration breakeven
- 86 / 99
- Maximum expiration profit
- 4
- Maximum expiration loss
- 86
- Underlying at expiration 100 → Loss 1
- Underlying at expiration 110 → Loss 1
4. How it changes
The position can start bearish and turn bullish after a large decline. Negative gamma near the short puts can accelerate the change.
5. What to watch for
The extra short put creates substantial downside exposure. The debit is only the upside-tail loss, not the maximum loss.
A deeper fall is not always better for a bearish-named strategy. The uncovered put reverses the payoff beyond the lower target.
Examples use illustrative entry prices and amounts per underlying unit, before costs. Contract amounts require the contract multiplier. Expiration payoffs assume the illustrated legs remain intact; earlier position values and exercise or assignment outcomes can differ.