Bull Put Spread

A bull put spread collects premium upfront and profits when the stock stays flat or rises. You sell a put at a higher strike and buy a put at a lower strike to cap your risk. The credit you receive is your maximum profit.

How a Bull Put Spread Works

You sell a put at a strike near or below the current stock price and buy a put at a lower strike on the same stock and expiration. The sold put brings in premium. The bought put costs less but caps your loss if the stock drops sharply.

Unlike a long call or bull call spread — where you pay to enter — a bull put spread puts cash in your account immediately. You keep that cash if the stock closes above your short put strike at expiration.

Example: A stock is at $100. You sell the $95 put for $2.50 and buy the $90 put for $1.00. Net credit: $1.50 per share ($150 total). If the stock closes above $95 at expiration, both puts expire worthless and you keep $150. If it falls to $88, you lose the maximum: ($5 spread − $1.50 credit) × 100 = $350.

Maximum Profit, Maximum Loss, and Breakeven

Maximum profit: The net credit received. In the example, $150. Achieved when the stock closes above the short put strike at expiration.

Maximum loss: (Spread width − credit received) × 100. In the example: ($5 − $1.50) × 100 = $350. Achieved when the stock closes below the long put strike.

Breakeven: Short put strike minus net credit. In the example: $95 − $1.50 = $93.50. The stock needs to close above $93.50 for the trade to be profitable.

When to Use a Bull Put Spread

You expect the stock to stay flat or rise modestly. You don't need the stock to go up — you just need it to not fall below your short strike. This makes it more forgiving than a long call for a mildly bullish view.

Implied volatility is elevated. Selling a spread during high IV means collecting more premium for the same obligation. If IV falls after entry, the spread loses value faster — which benefits the seller.

You want defined risk. Unlike selling a naked put, the long put caps your maximum loss regardless of how far the stock drops.

When Not to Use It

You're strongly bullish. A bull put spread's profit is capped at the premium received. If you expect a big move up, a long call or bull call spread gives you more upside.

A major catalyst is approaching. If the stock could drop 20% on earnings, your defined-risk spread still loses the maximum. Credit spreads near earnings require careful strike selection and awareness that IV crush benefits you only if the stock doesn't move against you.

Frequently Asked Questions

How is a bull put spread different from a cash-secured put?
A cash-secured put involves selling one put with cash set aside to buy the stock if assigned. A bull put spread adds a lower-strike long put for protection — you collect less premium but cap your maximum loss, and you don't need to reserve as much capital.

Is a bull put spread bullish or neutral?
Both. You profit if the stock rises, stays flat, or even drops slightly (as long as it stays above your breakeven). It's best described as "not bearish" — you need the stock to avoid falling through your short strike.

Can I close a bull put spread early?
Yes. If the spread has lost most of its value early in the trade (you've captured 50–75% of the credit), closing early is often the right move. You reduce time in the trade and free up capital.