Bull Put Spread

What Is a Bull Put Spread?

A bull put spread is a bullish, defined-risk options strategy entered for a net credit. The trader sells a put at a higher strike and simultaneously buys a put at a lower strike, both with the same expiration. The premium received from the short put exceeds the premium paid for the long put, generating an upfront credit that represents maximum profit.

Maximum profit is realized if the underlying asset closes above the short put strike at expiration — both puts expire worthless and the trader keeps the full credit. Maximum loss occurs if the underlying closes at or below the long put strike at expiration. The long put caps the downside, limiting the loss to the difference between the two strikes minus the net credit received.

Example structure (stock at $100):

• Sell the $95 put for $2.50
• Buy the $90 put for $0.75
• Net credit: $1.75 ($175 per contract)
• Max profit: $175 (underlying expires above $95)
• Max loss: $325 (spread width of $5 minus $1.75 credit)
• Breakeven: $93.25 (short put strike minus credit received)

Why It Matters for Options Traders

The bull put spread is a core income strategy for traders with a bullish or neutral outlook. Unlike a bull call spread (which is entered for a debit and requires the underlying to move up to profit), the bull put spread profits from the passage of time and the underlying simply staying above the short strike. You’re being paid to wait.

The strategy is particularly effective in elevated implied volatility environments. When IV is high, put premiums are inflated. Selling an elevated put and buying a cheaper put for protection generates a larger credit, improving the risk-reward. Theta decay also works in the seller’s favor — every day closer to expiration, the short put loses value (all else equal), and the position moves toward max profit.

Because the risk is defined, the strategy is accessible to traders in margin accounts without the capital requirements of naked put selling. Many traders use bull put spreads to express the same directional view as a short put while keeping margin usage and maximum loss strictly bounded.

Key Characteristics

• Risk profile: Defined risk (spread width minus credit) and defined reward (net credit received)
• Ideal environment: Bullish or neutral outlook with IV elevated relative to historical norms
• Breakeven: Short put strike minus net credit received
• Delta exposure: Positive — profits from price appreciation or time passage above the short strike
• Theta: Positive — time decay benefits the position as both puts lose extrinsic value
• Adjustment options: Roll the spread down or out if the underlying approaches the short strike; accept defined max loss if breached decisively