A short out-of-the-money put alongside a short call spread above the market. What defines it is an arithmetic rule rather than a shape: collect a total credit at least as large as the width of the call spread and there is no upside risk at all, because the credit already covers the most that spread can lose. One exposure is left — the underlying falling through the short put — and it is the exposure somebody willing to own the shares has already accepted. Price the three legs here and test the credit against the call-spread width first; below it, the property the structure is chosen for simply is not there.
Three legs on one ticket: a short put and a call spread, usually entered as two separate combined orders rather than one three-leg ticket, since few platforms bundle a put with a call spread automatically. The credit rule — total credit at least the call spread's width — has to be checked against the actual fill prices, not the mid-quotes used to plan the trade, because a wide market on either leg can leave the position short the rule by the time it fills. Re-verify it after any partial fill before treating the upside as covered.
Re-verify the credit rule (total credit at least the call spread's width) using actual fill prices before treating the upside as covered — a rule checked only against mid-quotes can be satisfied on screen and violated the moment the order fills in a moving market. Many traders choose the short put strike first, at a level they would accept owning the stock, and only then size the call spread to meet the credit rule, rather than optimizing the call spread and hoping the put strike works out. This is typically approved at the account tier for a cash-secured put plus a defined-risk spread, since the two components carry different requirements.
Common mistake. The common mistake is checking the credit rule against the mid-quotes used to plan the trade rather than against the prices it actually filled at, which can silently reopen the upside risk the structure was chosen to remove.
| # | Action | Instrument | Strike |
|---|---|---|---|
| 1 | Sell | Put | 160 |
| 2 | Sell | Call | 190 |
| 3 | Buy | Call | 195 |
Computed from the same strikes and net premium as the worked example above — not a simulation, the closed-form payoff evaluated at each price.
| NVDA at expiry | P&L |
|---|---|
| 140 | -$1575.00 |
| 155 | -$75.00 |
| 170 | $425.00 |
| 190 | $425.00 |
| 195 | -$75.00 |
| 210 | -$75.00 |
| Strategy | Market view | Opened for | Legs vs. this one |
|---|---|---|---|
| Bear Call Spread | Bearish to neutral — income | Credit | -1 |
| Cash-Secured Put | Neutral to bullish — income or acquisition | Credit | -2 |
| Iron Condor | Neutral — range-bound | Credit | +1 |
| Bull Put Spread | Bullish to neutral — income | Credit | -1 |