Bull Put Spread Strike Selection: Delta, Support, and Volatility
Summary
This episode from The Automated Trading Podcast provides a systematic framework for selecting strikes in bull put spreads to maximize income while minimizing risk. The hosts emphasize using delta as a primary probability metric, targeting the 0.40–0.50 zone for balance, and adjusting based on IV Rank to navigate high or low volatility environments. Crucially, they advise placing short strikes 1–2% below key support levels to create a safety buffer against intraday noise. The discussion concludes with a six-point pre-trade checklist and a focus on defined risk, arguing that emotional stabili…
Topics discussed
Introduction: The cost of sloppy strike selection
Anatomy of a Bull Put Spread: Long vs Short Put
Delta as a probability metric for risk
Key Delta Zones: 0.20, 0.50, and 0.80
The Sweet Spot: 0.40-0.50 Delta and Liquidity
Visualizing Delta Strikes on SPX
Reinforcing Delta with Market Structure and Support
The 1-2% Buffer Rule for Survivability
Example: Aligning Delta and Support on SPY
Volatility Impact: High IVR Strategy
Volatility Impact: Low IVR Strategy
Determining Spread Width Based on IV and Account Size
Full Walkthrough: Constructing a Trade in Low IV
Pre-Trade Checklist: Six Questions to Ask
Optimal Time to Expiration: 20-40 Days
Conclusion: Strike Choice and Emotional Stability
Listen ad-free on Castria