Course Description
A Long Put is the inverse of a Long Call. It gives you the right to sell an asset at a specific price, meaning as the market falls, the value of your option rises. In this course, we use a deep In-the-Money (ITM) US 500 put to show you how to trade bearishly with a high probability of success while keeping 100% of your gains tax-free.
Module 1: 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 Debit Advantage: This is a "Debit" trade. You pay a set amount upfront, and your risk is strictly limited to that initial payment.
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.
Module 2: What is a Long Put?
Buying a Put option gives you the right (but not the obligation) to sell an asset at a set price (the Strike) before the Expiry.
The Market View: You are "Bearish." You expect the US 500 to fall.
The Hedge: Many traders buy puts to act as "insurance" for their stock portfolios. If the market crashes, the put profit offsets the stock losses.
Defined Risk: Your max loss is the premium paid. Your potential profit is significant as the market drops toward zero.
Module 3: The US 500 Case Study (Deep ITM)
We are buying an In-the-Money (ITM) put. This means the strike price is already higher than the current market price.
The Setup:
Current US 500 Price: $6,970
Expiration: 65 Days
Strike Price: $7,100 (Deep In-the-Money)
Premium (Cost): 210.40 points
The Math at $5 per point:
Total Cost (Max Risk): 210.40 pts x $5 = $1,052.00
Intrinsic Value: 7,100 - 6,970 = 130 points (Value if the trade ended today)
Extrinsic Value (Time Cost): 210.40 - 130 = 80.40 points (The "Time Decay" you are paying for)
Breakeven Point at Expiry: 7,100 (Strike) - 210.40 (Premium) = $6,889.60
Module 4: "What If?" Expiry Scenarios
Let’s look at your $1,052.00 investment after the 65 days have passed.
Scenario A: US 500 rises to $7,100+ (Wrong Direction)
The market finished above your strike. The option is worthless.
Total Result: Max Loss of $1,052.00.
Scenario B: US 500 stays Flat (closes at $6,970)
Your option is worth 130 points (7,100 - 6,970).
Total Result: Loss of $402.00 (You lost the 80.40 pts of time value you paid for).
Scenario C: US 500 Crashes to 6,500 (Bearish Win)
Your option is worth 600 points (7,100 -$6,500).
Profit: 600 pts (Value) - 210.40 pts (Cost) = 389.60 points profit.
Total Result: Profit of $1,948.00 (185% ROI) This is the "leverage effect." A relatively small 6.7% correction in the stock market resulted in an 185% gain on your capital. This is why Long Puts are the preferred tool for "Crash Protection"—they move significantly faster than the underlying market.
Module 5: Strategy Pivot—The Bear Put Spread
If the 80.40 points of "Time Value" feels too expensive, you can reduce your risk by turning this into a Bear Put Spread. By selling a further out-of-the-money put (e.g., at $6,700) against your $7,100 put, you receive a credit that lowers your total cost and offsets some of that time decay.
Module 6: The "Delta Compass" Workaround
IG Index won't show you the probability. For a bearish trade:
Check External Delta: Use Yahoo Finance to find the $7,100 Strike on the SPX.
Look for Negative Delta: An ITM put will have a Delta of roughly -0.70 to -0.80.
The Logic: This means for every 1 point the US 500 falls, your option gains approximately $0.75 in value.
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. | |
Long Put | Aggressively Bearish | Significant | Premium Paid | ~30% - 40% | Hedging a crash. |
Neutral to Bullish | Net Credit | High | 75% - 85% | Consistent income. | |
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 Trade (Risk-Free)
We strongly recommend that all our students start by practicing these strategies in a simulated environment. This allows you to master the IG deal ticket, understand price fluctuations, and test your "Option Income Engine" without risking a single penny.
Switch to a live account only once you are comfortable with the platform and your strategy execution.
🚀 Free Strategy Call
Trading theory is only 10% of the journey. The remaining 90% is mastering strategy application, market psychology, and capital preservation under live conditions.
Don't risk your capital making avoidable beginner mistakes. Leverage the experience of a dedicated trading mentor.
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