Bull Put Spread

What is a Bull Put Spread?

A bull put spread is a credit spread. You sell a put at a higher strike and buy a put at a lower strike, same expiration. You collect premium upfront (the credit), and you profit if the stock stays above the short strike by expiration. The long put limits your downside risk.

This is one of the most popular trades among income-oriented options traders. You collect money on day one and the trade works as long as the stock does not drop too much. Time is on your side.

How to Set It Up

Sell 1 put at the higher strike (closer to the current stock price)
Buy 1 put at the lower strike (further OTM)
Same expiration for both
Strike selection: Sell the put at a strike where you think the stock will stay above. Buying the lower put defines your max risk. A $5-wide spread is common.
Expiration: 30-45 days out. This maximizes theta decay in your favor.

You receive a net credit when you enter. That credit is yours to keep if both puts expire worthless.

When to Use This Strategy

Use a bull put spread when:

You are neutral to moderately bullish
You want to collect income with defined risk
The stock is sitting above a strong support level
You want time decay working for you, not against you
Implied volatility is elevated (bigger premiums to sell)

This is a high-probability trade. You can set your short strike well below the current price and still collect decent premium. You do not need the stock to go up. You just need it to not drop too much.

Example Trade

Stock XYZ is trading at $100. You think it will stay above $95.

Sell 1 XYZ $95 put for $2.50
Buy 1 XYZ $90 put for $1.00
Net credit: $2.50 - $1.00 = $1.50 ($150 collected)
Max profit: $150 (the credit)
Max loss: ($95 - $90 - $1.50) x 100 = $350
Breakeven: $95 - $1.50 = $93.50

If XYZ stays above $95 at expiration, both puts expire worthless and you keep the $150. That is a 43% return on the $350 at risk.

If XYZ drops to $88, your short put is $7 ITM and your long put is $2 ITM. You lose the max of $350.

If XYZ is at $94, your short put is worth $1 and the long put is worthless. You lose $1 x 100 = $100, but you collected $150, so you net $50 profit. Still in the green.

Risk and Reward

Max profit: The net credit received. $150. Happens when the stock closes at or above the short strike at expiration.
Max loss: (Strike width - net credit) x 100. $350. Happens when the stock closes at or below the long strike.
Breakeven: Short strike minus the net credit. $93.50.

The risk-to-reward here is $350 risk for $150 reward. That seems unfavorable, but the probability of profit is typically 60-70% or higher depending on how far OTM you sell. High probability, lower reward per trade.

Tips and Common Mistakes

Do not sell too close to the money for extra premium. Going too aggressive lowers your probability of profit. Find the balance.
Close at 50% of max profit. If you collected $150 and the spread is now worth $0.75, buy it back for $75 and lock in $75 profit. Do not risk giving it back for the last few dollars.
Manage losers early. If the stock drops through your short strike, close the trade. Do not hope for a bounce. A good rule is to close at 2x the credit received in losses.
Do not oversize. Because each spread ties up margin (the width of the strikes minus the credit), it is easy to put on too many positions. Keep each trade to 2-5% of your account.

Related Strategies

Bull Call Spread — a debit spread with the same bullish outlook but you pay upfront instead of collecting
Bear Call Spread — the bearish version of a credit spread
Iron Condor — combines a bull put spread with a bear call spread for a neutral trade