You are cautiously bullish on the common stock of the Wildwood Corporation over

Question

You are cautiously bullish on the common stock of the Wildwood Corporation over the next several months. The current price of the stock is $50 per share. You want to establish a bullish money spread to help limit the cost of your option position. You find the following option quotes: Underlying stock price $50

To establish a bull money spread with puts, you would_____________?

A. Sell the 55 put and buy the 45 put

B.Buy the 55 put and buy the 45 put

C. Buy the 55 put and sell the 45 put

D. Sell the 55 put and sell the 45 put

Explanation / Answer

In Bull money spread with puts one put OTM put is bought and one ITM put is sold.

Here As the spot price is 50, ITM put will be put with exercise price greater than 50 and OTM put will put with exercise price lower than 50.

Hence, Option C is correct.

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