IWM bull put spread: credit, risk, strikes

You are still selling downside — just not all of it. The long $279 put cuts the tail off below that level, which is why this needs $477 of buying power instead of the $28,500 a cash-secured put would tie up.

Above $285 at August 28, 2026, both puts expire worthless and you keep the full $123. Below $279, you lose the maximum $477. Breakeven is $283.77.

Return on risk is 26% for 27 days — 349% 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. $477 per spread is small; the temptation to sell ten of them because the buying power allows it is how a 68%-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 $28,500 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 Aug 28 strikes are $1 apart near the money (0.34% of spot). At that granularity the strike ladder stops being a constraint on the trade and starts being a genuine choice. 72k contracts of open interest on Aug 28 is workable around the money and thin in the wings — width costs more here than the ladder suggests. 55 strikes on that expiry — 47% 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 4.9% 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 Aug 28 options are pricing a one-standard-deviation move of $15.01 over 27 days — roughly −5.2% to +5.2%, or $276.19 to $306.21. Everything the bull put spread above collects is rent on that range. If IWM routinely covers 5.2% in 27 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.