Bull Put Spread options strategy

What is a bull put spread?

A bull put spread is a credit spread built by selling a put at a higher strike and buying a put at a lower strike with the same expiration. The higher-strike put brings in more premium than the lower-strike put costs, so the trader receives a net credit that represents the maximum profit. The long put caps the downside, converting a potentially large short-put loss into a defined, known amount.

It is also called a short put vertical or put credit spread. The strategy expresses a bullish to neutral view: it profits if the underlying rises, stays flat, or falls only slightly.

When to use it and the market view

A bull put spread suits a trader who believes the underlying will hold above a support level through expiration. If a stock trades near $212 and $210 looks like a floor, selling the 210 put and buying the 200 put collects premium while limiting the damage if support breaks. The trade does not need a rally; time decay works in its favor as long as the price stays above the short strike.

It is often preferred over a cash-secured or naked short put because it ties up far less capital; the margin requirement is typically the spread width minus the credit. It is usually considered when implied volatility is elevated, because put premiums are then richer. The trade-off is that the credit is smaller than for a single short put, and the loss can still exceed the credit.

Payoff, formulas, and a 200 strike example

Let K2 be the higher (short) put strike, K1 the lower (long) put strike, S the expiration price, and C the net credit.

Profit = C − max(K2 − S, 0) + max(K1 − S, 0)

Breakeven = K2 − C · Maximum profit = C · Maximum loss = (K2 − K1) − C

Suppose you sell the 210 put for $8 and buy the 200 put for $4, a net credit of $4 per share ($400 per contract). At expiration:

• S = 215: both puts expire worthless. Profit = +$4, the maximum.
• S = 208: the short put is worth 2. Profit = 4 − 2 = +$2 per share.
• S = 206: profit = 4 − 4 = $0, the breakeven.
• S = 203: profit = 4 − 7 = −$3 per share ($300 per contract).
• S = 190: profit = 4 − 20 + 10 = −$6 per share ($600 per contract), the maximum loss.

The payoff is the mirror image of a bear call spread: a flat profit zone above the short strike, a sloped section between the strikes, and a flat, capped loss below the long strike.

Maximum profit, loss, and breakeven

Measure	Formula	210/200 spread, $4 credit
Maximum profit	Net credit	$4 per share ($400 per contract) at or above 210
Maximum loss	(K2 − K1) − credit	$6 per share ($600 per contract) at or below 200
Breakeven at expiration	K2 − credit	$206

Greeks and implied volatility impact

The spread has positive delta, benefiting from a rising underlying. Theta is typically positive while the price is above the short strike, because the short put's time value decays faster than the long put's. Gamma is negative near the short strike, so a quick drop close to expiration can move the position from maximum profit to maximum loss within a narrow range.

Vega is generally negative: falling implied volatility helps and rising IV hurts. Market sell-offs often come with IV spikes, so a bull put spread can lose value from both a lower price and higher volatility at the same time. Put skew tends to make the higher-strike short put relatively rich, which is part of why the strategy is popular for income.

Risks to manage

The key risk is a decline through the short strike, which often happens quickly during broad market sell-offs. An in-the-money short put can be assigned early, leaving you long 100 shares per contract until you exercise the long put or close the position. Because the maximum loss is larger than the credit, size positions so that a full loss is acceptable, avoid clustering many spreads on correlated underlyings, and decide on an exit rule before entering.