Bull Put Spread
Collect premium on bullish trades with the bull put spread credit strategy
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Bull Put Spread
Time to flip the script. Instead of paying for a bullish position, what if someone paid you? The bull put spread is a credit spread. You collect money up front and profit if the stock stays above your strikes.
The Structure
You sell a put at a higher strike and buy a put at a lower strike, same expiration. The short put generates income. The long put protects you from a blowout loss.
Since you are selling the more expensive option, you receive a net credit. That credit is your maximum profit. Your max loss is the width of the strikes minus the credit.
Real Example
AMZN is at $185. You think it holds above $175 over the next 30 days.
- Sell the $175 put for $3.50
- Buy the $170 put for $2.00
- Net credit: $1.50 ($150 per spread)
Max profit: $150 — the credit received Max loss: $350 — width ($5) minus credit ($1.50) Breakeven: $173.50 — short strike minus credit
If AMZN stays above $175 at expiration, both puts expire worthless and you keep the $150. The stock can go to $190, $200, $300 — does not matter. You still make $150. It can even drop to $174 and you still make money.
Why Traders Love Credit Spreads
Time is on your side. Every day that passes, both options lose time value. But the short put (which you sold) decays faster because it is closer to the money. Time decay is now working for you instead of against you.
You can be wrong and still win. In the example above, AMZN can drop from $185 to $176 — a $9 decline — and you still profit. You do not need to be precisely right about direction. You just need the stock to stay above a level.
High probability. If you sell puts below the current price, you start with probability on your side. In the example, the stock needs to fall more than 6% for you to lose. That is a meaningful cushion.
Probability vs. Payout
Here is the tradeoff you need to understand. The bull put spread in the example has a risk-reward of roughly 1:0.43 (risk $350 to make $150). That looks unfavorable compared to a bull call spread where you might risk $500 to make $500.
But look at probability. The bull put spread might win 70% of the time because you have that cushion below the current price. The bull call spread might win 40% of the time because it needs the stock to go up.
Over many trades, a strategy that wins 70% of the time making $150 and loses 30% of the time losing $350 nets: (0.70 x $150) - (0.30 x $350) = $105 - $105 = breakeven. So you need to pick your spots well and manage losers early.
Strike Selection Guidelines
Short strike: Place it below a support level or below a key moving average. You want the stock to have to break something meaningful before your trade is threatened. A 1-standard-deviation move below the current price is a common starting point.
Width: Typically $5 on stocks under $100, $5 to $10 on stocks $100 to $300, and $10 to $25 on higher-priced stocks. Wider spreads collect more credit but risk more.
Delta of the short strike: Many traders target the 25 to 35 delta put for the short leg. This gives roughly a 65% to 75% chance of the option expiring worthless.
Managing the Trade
Close at 50% of max profit. If you collected $1.50, close when the spread is worth $0.75. You made half the max profit with potentially weeks left. Why sit through risk for the remaining $0.75?
Close losers at 2x the credit. If you collected $1.50 and the spread moves against you to $3.00, close it. You lost $1.50, which is a manageable loss. Do not wait until it is worth $4.50 and you are losing $3.00.
Roll if your thesis is intact. If the stock dropped but support is holding, you can roll the spread to the next expiration for additional credit. This gives you more time and lowers your breakeven.
When to Avoid
Do not sell bull put spreads when:
- A stock is in a clear downtrend (you are fighting the trend)
- Earnings are before expiration (gap risk can blow through your strikes)
- IV is very low (the credit will be tiny and not worth the risk)
- You do not have a clear support level below the short strike
The bull put spread is one of the most popular strategies among consistent traders. It lets you sell premium, define your risk, and profit from time decay. Get comfortable with this one — you will use it often.