IWM bull put spread: credit, risk, strikes

You are still selling downside — just not all of it. The long $271 put cuts the tail off below that level, which is why this needs $302 of buying power instead of the $27,500 a cash-secured put would tie up.

Above $275 at October 30, 2026, both puts expire worthless and you keep the full $98. Below $271, you lose the maximum $302. Breakeven is $274.02.

Return on risk is 32% for 33 days — 359% annualized. That headline is the reason people prefer spreads to cash-secured puts, and the reason spreads blow up accounts: the same capital supports several times the notional risk.

The risk is leverage, not the structure. $302 per spread is small; the temptation to sell ten of them because the buying power allows it is how a 69%-win-rate trade produces a losing year.

Early assignment on the short leg leaves you long 100 shares plus a long put — a synthetic call, not a disaster, but a position you did not choose and one that requires $27,500 of cash on Monday.

The structural problem with short premium is not the loss rate, it is the loss SIZE. A long run of small wins funded by an occasional large loss looks like skill on a monthly statement and like variance on a five-year one.

The richest index premium on this list, and the one that most reliably pays for itself — small-cap implied vol has run a wider gap over realized than SPY's for years. The catch is trend: IWM does not chop, it goes, and a short strike that looked comfortable at 0.16 delta gets run over in a week when the rate narrative flips.

IWM's Oct 30 strikes are $2 apart near the money (0.71% of spot). Enough rungs to express a view, few enough that each one moves the economics visibly. 144k contracts of open interest on Oct 30 is deep enough that multi-leg orders fill near mid at retail size. 37 strikes on that expiry — 90% of the board — carry prints that agree with their own implied volatility and hold up across the ladder, and those are the strikes priced here. Deep enough for four legs at retail size; the wings thin out faster than on SPY, so cap width at what the book supports.

Skew is ordinary — the 25-delta put implies 2.7% more vol than the 25-delta call, about what an equity surface looks like when nothing unusual is being priced. Neither side of the chain is being singled out, which is the condition under which a symmetric structure like a condor is actually symmetric. The term structure is flat inside 1.5% between the two captured expiries, so there is no calendar edge to harvest and no event visibly priced into one month over the other.

At 19% ATM implied vol, the Oct 30 options are pricing a one-standard-deviation move of $16.24 over 33 days — roughly −5.8% to +5.8%, or $265.73 to $298.21. Everything the bull put spread above collects is rent on that range. If IWM routinely covers 5.8% in 33 days, the credit is fair compensation rather than edge.

The mistake this name punishes hardest: Selling the wings because the index label implies mean reversion. IWM's realized distribution has fatter shoulders than SPY's at the same implied vol.