Bull Put Spread
Selling a higher-strike put and buying a lower-strike put to receive credit while defining downside risk.
What is a Bull Put Spread?
Selling a higher-strike put and buying a lower-strike put to receive credit while defining downside risk.
Construction
Sell a higher-strike put and buy a lower-strike put with the same expiration.
When it may be studied
To study a bullish or neutral credit structure with defined risk when the underlying remains above the short strike.
Expiration profile
Maximum risk: Strike width minus credit
Maximum reward: Credit received
Break-even: Short put strike minus credit
Worked example
Sell a 100 put and buy a 95 put for a $1.50 credit. Maximum simplified profit is $150; maximum loss is $350; break-even is $98.50.
Key risks and limitations
The maximum loss can be several times the credit. Assignment can create share exposure, and wide bid-ask spreads can impair exits.
Entry and exit checklist
- Confirm contract multiplier, expiration, exercise style, settlement, and liquidity.
- Calculate the maximum loss under the intended structure.
- Review earnings, dividends, corporate actions, and other event risks.
- Define an exit, adjustment, or expiration plan before entry.
- Understand what happens if one leg is assigned or exercised early.