3 Key Filters for Finding the Best Stocks for Bull Put Spreads

by Roger Scott | Apr 16, 2025

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When it comes to bull put spreads, trade selection is half the battle. If you get the right setup — strong trend, clear support, elevated volatility — the trade usually takes care of itself. The challenge is sifting through noise to find setups with a high probability of success and enough premium to make the trade worth it.

Here are three key filters I use to zero in on candidates that consistently deliver.

1. Follow the trend, not the news

You don’t need to guess what the market’s going to do next week. You just need to find a stock that’s moving up — or at least holding trend — and use that trend to your advantage.

If price is riding the 8- or 21-day EMA, it’s on my radar. If it’s hugging the 50-day, even better. I want confirmation that buyers are stepping in where they’re supposed to.

Stocks like Nvidia (NVDA) and Eli Lilly (LLY) fit that profile at different times. I’m not looking for breakout entries — I’m looking for structure. If I sell a bull put spread underneath an uptrend, I want to feel like there’s a floor of demand under my strikes.

2. Prioritize liquid names with tight spreads

Liquidity isn’t just about fill speed — it’s about risk. If an option chain has wide bid-ask spreads or thin open interest, you’re exposing yourself to slippage on the way in and out.

That’s friction you don’t need.

I won’t even consider a stock unless it’s trading at least 1 million shares a day. I also want the spreads on my short leg to be under $0.15 — max $0.20 — and I want to see real volume. Stocks in the S&P 500 Health Care (XLV) and Technology (XLK) sectors often fit the bill because they’ve got liquid chains and strong institutional flows.

3. Look for high implied volatility — but not for direction

I’m not using implied volatility (IV) to bet on a move. I’m using it to get paid to be wrong. High IV lets me sell spreads further out of the money and still collect decent premium. That distance gives me a buffer in case the stock chops sideways or even pulls back.

I usually want a stock’s IV rank over 50, ideally over 70. That tells me the market’s pricing in a bigger move than usual — and that’s where I can step in and say, “Sure, I’ll take the other side of that fear.”

If all three filters line up — trend, liquidity, volatility — I’ve got a trade worth sizing up. If not, I wait. It’s a numbers game. The best edge is being selective enough to only swing when the pitch is where you want it.

I hope that helps!

Roger Scott
Roger Scott Trading

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