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OPTIONS STRATEGIES·BULLISH·2 LEGS

Bull put spread

Sell a higher-strike put, buy a lower-strike put. Collect credit; profit if stock stays above the short strike. Common income play in uptrends.

INPUTS
Underlying price
$
Centers the payoff chart and computes P&L at this price.
LEGS
Short upper put
Type
Side
Strike
$
Qty
Premium
$
Long lower put
Type
Side
Strike
$
Qty
Premium
$
RESULT
BE $98.80spot $100.00
$60.002 strikes$140.00
P&L at current spot (expiry)
+$120
Net credit+$120
Max profit+$120
Max loss−$380
Breakeven$98.80
Risk / reward0.32 : 1
RISK PROFILE
Max profit
Net credit received
Max loss
Strike width × 100 − net credit
Breakeven
Upper strike − (credit ÷ 100)
HOW IT WORKS

How a bull put spread works

A bull put spread sells a put and buys a further out-of-the-money put in the same expiry, for a net credit. It profits when the stock stays above the short put strike. The long put caps what the position can lose, turning the short put's large downside into a fixed number.

It is the mirror image of the bear call spread and behaves the same way: time decay works for you, the maximum profit is the credit, and the trade wins on flat, higher, or mildly lower prices. You are being paid for the stock not falling past a level you chose.

The maximum loss is the strike width minus the credit. Because that is known at entry, the position can be sized honestly — you know the worst case before you take it, which is not true of the naked short put it replaces.

WORKED EXAMPLE

A worked example

XYZ trades at $100 and you think $95 holds as support. You sell the $95 put for $2.50 per share and buy the $90 put for $1.00, both expiring in 30 days.

Net credit
$2.50 − $1.00 = $1.50 × 100 = $150 (max profit)
Max loss
($5 width − $1.50) × 100 = $350
Breakeven
$95 short strike − $1.50 = $93.50
At expiry, XYZ ≥ $95
Both expire worthless, keep $150
At expiry, XYZ ≤ $90
Fully breached, −$350 — and no worse below that

The stock can fall 6.5% and you still break even. That cushion is what you are buying with the poor risk-reward ratio, and it is only worth it if a $350 loss is a size you can absorb repeatedly.

FIT

When a bull put spread fits — and when it doesn't

Consider it when
  • You are neutral to bullish and can point to a support level you believe in.
  • Implied volatility is elevated — put premiums richen on fear, which is when selling them pays best.
  • You want short-put income with a defined worst case.
Think twice when
  • The stock is breaking down. Selling puts into a decline puts you on the wrong side of momentum.
  • The credit is small relative to the width, leaving a payoff that cannot survive a normal loss rate.
  • Earnings fall inside the expiry and could gap the stock through both strikes at once.
FAQ

Common questions

What is the maximum loss on a bull put spread?

(Strike width − net credit) × 100. A $5-wide spread opened for a $1.50 credit risks $350 per contract, capped no matter how far the stock falls.

How is the breakeven calculated?

Short put strike − net credit. Selling the $95 put for a $1.50 net credit gives a breakeven of $93.50 at expiry.

Is a bull put spread the same as a cash-secured put?

No. Both are bullish and both collect a credit, but the spread buys a lower put that caps the loss and requires far less capital. The cash-secured put has more risk and, if assigned, leaves you owning the shares.

Should I let it expire or close early?

Many traders close once most of the credit has been captured, since the remaining profit is small while the position still carries assignment and gamma risk near the short strike.

RELATED STRATEGIES
Bear call spread
Bearish · Credit spread, defined risk.
Bear put spread
Bearish · Debit spread, defined risk and reward.
Iron condor
Neutral · Defined-risk credit, profits when stock stays in range.
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