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.
'Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.'
🚀 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.
'Invest with Confidence'