The Bull Put Spread option trading strategy is employed when the options trader thinks that the price of the underlying asset will go up moderately in the near term. The Bull Put Spread options strategy is also known as the bull put Credit Spread as a credit is received upon entering the trade.
Buy 1 put at the lower strike price; Sell 1 put at the higher strike price. Use the same expiration date.
Bull Put Spreads can be implemented by selling a higher striking in-the-money put option and buying a lower striking out-of-the-money put option on the same underlying stock with the same expiration date.
Limited Upside Profit
If the stock price closes above the higher strike price on expiration date, both options expire worthless and the Bull Put Spread option strategy earns the maximum profit which is equal to the credit taken in when entering the position.
The net premium received.
Limited Downside Risk
If the stock price drops below the lower strike price on expiration date, then the Bull Put Spread strategy incurs a maximum loss equal to the difference between the strike prices of the two puts minus the net credit received when putting on the trade.
The difference between the two strikes minus the net premium received.
Breakeven Point(s)
Higher strike price minus the net premium received, when that price lies between the strikes.
Bull Put Spread Example
An options trader believes that XYZ stock trading at $43 is going to rally soon and enters a Bull Put Spread by buying a JUL 40 put for $100 and writing a JUL 45 put for $300. Thus, the trader receives a net credit of $200 when entering the spread position.
The stock price of XYZ begins to rise and closes at $46 on expiration date. Both options expire worthless and the options trader keeps the entire credit of $200 as profit, which is also the maximum profit possible.
If the price of XYZ had declined to $38 instead, both options expire in-the-money with the JUL 40 call having an intrinsic value of $200 and the JUL 45 call having an intrinsic value of $700. This means that the spread is now worth $500 at expiration. Since the trader had received a credit of $200 when he entered the spread, his net loss comes to $300. This is also his maximum possible loss.
These examples use standard U.S. stock options with a 100-share contract size and matching expiration dates. Related structures can use ETF, index or futures options, but contract multipliers, exercise style, settlement and the underlying price range can differ. A stock’s zero price floor must not be assumed for every futures contract.
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Commissions
For ease of understanding, these examples exclude commissions, fees and financing costs. Include all costs when comparing an actual position; there is no universal commission amount.
For active traders, transaction costs can consume a significant part of returns. Compare the full commission and fee schedule, exercise and assignment charges, and bid-ask spreads. The cost of entering and closing every leg matters.
Similar Strategies
The following strategies offer related market exposure. Compare their construction, cost, maximum loss and assignment obligations; a similar outlook does not mean identical risk.
Bull Spread on a Debit
The Bull Put Spread is a Credit Spread as the difference between the sale and purchase of the two options results in a net credit. For a bullish spread position that is entered with a net debit, see Bull Call Spread.
Amounts are per share before fees. Multiply by the shares covered by the position; standard equity options usually cover 100 shares per contract. If a maximum profit or loss calculation gives a negative amount, use zero. These figures assume matching contracts held to expiration and do not include financing or early assignment.
Before expiration and assignment
The diagrams and worked outcomes describe expiration payoffs, not an option’s market price before expiration. Time decay, implied volatility, rates, dividends and bid-ask spreads affect early closing values. American-style short options can be assigned early; a protective long option is not automatically exercised when a short leg is assigned. Closing or exercising one leg can change the remaining position’s risk.
Compare This Strategy
Optional further reading to help you compare the tradeoffs.
- Bull Call Spread vs Bull Put Spread — Compare actual executable prices, fees, collateral treatment and assignment exposure.
Advanced Strategy Variations
Build on the core strategies with these less common structures. Match the option legs and expirations when comparing names.
Short-term options applications
Explore Short-Term Options Trading to see how weekly, 1DTE and 0DTE expirations affect timing, price sensitivity and expiration risk. Availability and settlement depend on the selected product and series.
