We are adding a 1×2 put spread in PayPal (PYPL) today. Because there is a “naked” put involved, this only makes sense if willing to own 100 shares of stock at a much lower cost basis than current prices. The details are below:
Buy to open: PYPL Nov 21st (monthly) 65.00 strike put (ratio of 1)
Sell to open: PYPL Nov 21st (monthly) 60.00 strike put (ratio of 2)
Credit: 0.03
Probable reward = 0.03 or $3.00 per spread (if the stock finishes above 65/share)
Max reward = 5.03 or $503.00 per spread (the nearer to 60/share finish the better)
Max risk = owning 100 shares of PYPL at a cost basis of 54.97 per share (losses below 54.97)