Watch: Setting up the US 500 Bull Put Spread
Traditional Options vs. Spread Betting
IG’s "options" are actually Spread Bets based on option prices, offering a unique edge for traders in the UK and Ireland.
Tax Status: Spread betting is unique to the UK and Ireland. Profits are exempt from Capital Gains Tax (CGT) and Stamp Duty.
Trade Unit: Instead of "contracts" (100 shares), you trade in $ per point (or £ per point).
The Credit Advantage: Unlike the Bear Put Spread where you pay a debit, here you receive a credit upfront. You are the "house" collecting the premium.
Currency: You can trade US markets in GBP or USD to avoid FX conversion fees.
Note: While you can fund in Euro, spread bets on options are executed in GBP or USD only.
What is a Bull Put Spread?
A Bull Put Spread is a "credit spread" used when you are neutral to bullish.
How to build it on IG:
Sell a Put Option at a higher strike price (this is the "income" leg).
Buy a Put Option at a lower strike price (this is your "insurance" leg).
Why use this strategy?
Instant Income: You get paid to enter the trade.
High Probability: You win if the market goes up, stays flat, or even drops a little.
Defined Risk: Your max loss is strictly capped, protecting you from "Black Swan" market crashes.
The Math of the Trade (US 500 Case Study)
Let's look at a real-world example on the US 500, currently trading at 6,962.
The Setup (14-Day Expiry):
Sell 6700 Put: Receive 12.23 points.
Buy 6600 Put: Pay 8.10 points.
Net Credit: 4.13 points (12.23 - 8.10).
At a $5 per point stake:
Max Profit (Instant Income): $20.65 (4.13 pts times $5).
Maximum Risk: $479.35 (100 pts spread width - 4.13 credit) times $5.
The "What If?" Expiry Scenarios
Based on a $5 per point stake:
Scenario A: US 500 at 7100 (Bullish)
Spread Value: 0 points.
Result: +$20.65 (Max Profit).
Scenario B: US 500 at 6962 (Current Price/Flat)
Spread Value: 0 points.
Result: +$20.65 (Max Profit).
Scenario C: US 500 at 6700 (At the Strike)
Spread Value: 0 points.
Result: +$20.65 (Max Profit).
Scenario D: US 500 at 6695.87 (Breakeven)
Spread Value: 4.13 points.
Result: $0 (Even).
Scenario E: US 500 at 6600 (Lower Strike/Crash)
Spread Value: 100 points.
Result: -$479.35 (Max Loss).
Why the 80% Success Rate?
This is a "High Probability" trade because you have a massive Margin of Safety.
Buffer Zone: With the market at 6962 and your strike at 6700, the index can drop nearly 4% in 14 days, and you still keep 100% of your profit.
Delta as Probability: A 6700 strike typically has a Delta of ~0.20, meaning there is only a 20% chance the market hits that level. This gives you a mathematical 80% chance of success.
Navigating Without Greeks (The Workaround)
IG Index does not display Delta on their spread betting tickets. To ensure you are picking an 80% probability trade, use this workaround:
The External Compass: Maybe you have a traditional options account also with IBKR, or open a free tool like Yahoo Finance or the CBOE SPX Option Chain.
Match the Strike: Look for the Put option strike with a Delta of 0.15 to 0.20 on the external site.
Execution: Note that strike price (e.g., 6700) and return to your IG platform to place the spread bet on that specific level.
Execution & The Margin "Bummer"
Navigate: Open IG and select 'Options'.
Select Instrument: Select US 500
Stake Size: At $5 per point, you are controlling a large position. Ensure your account is sized correctly.
Separate Execution: You must sell the 6700 Put and buy the 6600 Put as two separate, individual trades.
The Margin "Bummer": IG treats these as separate bets and does not offset the margin.
The Impact: In this example, margin may be $1,500 per leg ($3,000 total). You must have this cash in your account to hold the trade, even though your actual risk is less than $500.
The 80% Success Checklist
Market Outlook: US 500 trending up or sideways.
Volatility (VIX): Best when VIX is high (above 20) as it inflates the credits you receive.
The Delta Rule: Short Put Delta is between 0.15 and 0.20 (via external compass).
Margin of Safety: Short strike is 3-5% away from the current price.
Days to Expiry (DTE): Up to 45 days (Max).
Strategy Comparison: Risk vs. Probability
Choosing the right strategy depends on your market view and your risk tolerance. At ShareNavigator, we emphasize Probability of Profit (PoP) over "lottery ticket" home runs.
Strategy | Market View | Max Profit | Max Risk | Probability of Profit | Best For... |
Aggressively Bullish | Unlimited | Premium Paid | ~30% - 40% | Fast-moving rallies. | |
Aggressively Bearish | Significant | Premium Paid | ~30% - 40% | Hedging a crash. | |
Neutral to Bullish | Net Credit | High | 75% - 85% | Consistent income. | |
Bull Put Spread | Neutral to Bullish | Net Credit | Capped | 70% - 85% | Consistent income. |
Neutral to Bearish | Net Credit | Capped | 70% - 85% | Selling "resistance." | |
Moderately Bullish | Capped | Net Debit | ~50% - 60% | Cheap bullish entry. | |
Moderately Bearish | Capped | Net Debit | ~50% - 60% | Cheap bearish entry. |
Why Credit Spreads Have a Higher Win Rate
A common question students ask is: "Why not just short the stock or buy a long put if I'm bearish?"
The answer lies in the three directions of the market:
Shorting a Stock / Long Put: You only win if the market moves DOWN. If the market stays flat or goes up, you lose. (1 out of 3 scenarios).
Bear Call Spread: You win if the market moves DOWN, stays FLAT, or even RISES SLIGHTLY (as long as it stays below your ceiling). (3 out of 3 scenarios).
By "selling" time and volatility instead of just betting on direction, you turn the math of the market in your favor.
💡 The ShareNavigator Golden Rule
"We don't try to predict the next 500-point move. We try to identify the 300-point range where the market won't go. Trading is not about being 'right'; it's about not being 'wrong' enough to lose money."
🛠 Practice Before You Play: The Demo Account
A Bull Put Spread involves "selling" an option, which can feel intimidating for beginners. On IG Index, because the two legs of your trade are placed separately, it is very easy to make a manual error—like clicking "Buy" when you meant "Sell," or entering the wrong stake size.
Why use an IG Demo Account?
Virtual Funds: You start with £10,000 (or €10,000) in virtual capital to test your bearish theories.
Master the "Bummer": Use the demo to see exactly how much margin is tied up by your short leg and how it impacts your "Available to Trade" balance.
Zero Risk: Make your first 10-20 spread trades in a risk-free environment until the process of placing separate orders feels like second nature.
🚀 Open Your Demo Account
Don't risk your hard-earned capital while you are still learning the interface. Set up your practice environment in less than two minutes:
Open Demo Account: Click Here
Select "Spread Betting": Ensure you choose the Spread Betting demo to access
Place Your First Spread: Use our US 500 example
Course Challenge: Open a demo account today and place one Bull Put Spread on the S&P 500. Check back in 24 hours to see how the "Theta" (time decay) has affected the price of your spread!
Traditional Bull Put Strategy Course
To get a full understanding of bull put options, we recommend that you also get a full understanding of the traditional bull put strategy. Click Here to access the course.
🚀 Free Strategy Call
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