Bull Put Spread: How It Works, Example and Risks
A bull put spread sells a put and buys a lower-strike put for protection, collecting a credit. Traders use it when they expect the stock to stay above the short strike. The main risk is a drop below the long strike, which locks in max loss.
At a glance
| Outlook | bullish |
|---|---|
| Level | intermediate |
| Max profit | Net credit × 100 |
| Max loss | (Width − credit) × 100 |
| Breakeven | Short strike − credit |
| Greeks exposure | Positive delta, positive theta, negative vega |
| Ideal IV environment | High IV |
Payoff diagram
Worked example
Sell the $95 put for $2.00, buy the $90 put for $0.80: credit $1.20 ($120). Max loss ($5 − $1.20) × 100 = $380. Breakeven $93.80.
How to manage it
- Close at 50% of max profit.
- Size so max loss fits your risk budget.
- Exit or roll if the short strike is threatened.
Risks
- Max loss larger than max profit.
- Gap risk through both strikes.
- Early assignment on the short put.
Questions
Is a bull put spread bullish?
Yes — it profits if price stays above the short strike.
How is max loss calculated?
Width minus credit, times 100.
Why use it instead of a cash-secured put?
Defined risk and far less capital.
Related
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