Strategy · Vertical Spreads

BULL PUT SPREAD

BullishDefined riskIntermediate

Overview

Sell a higher-strike put and buy a lower-strike put in the same expiration. You collect a net credit upfront — that's your maximum profit. The spread profits as long as the stock remains above the short put strike through expiration.

What it does

You're collecting premium by agreeing to take risk below a certain price level — but your risk is capped by the long put you bought as a hedge. The stock just needs to stay above the short put strike through expiration. You keep the entire credit if both options expire out-of-the-money. It's one of the most popular strategies for consistent income generation.

Structure

sell 1 put + buy 1 put

Setup

1.Choose a stock you expect to stay flat or rise.
2.Sell 1 Put at a higher strike (near the current price or below).
3.Buy 1 Put at a lower strike (your max loss hedge).
4.Same expiration — 30–45 days is typical.
5.Confirm the order is a net credit; max profit = credit received, max loss = width minus credit.

Max profit

Net Credit Received. E.g., $2.30 × 100 = $230 per spread.

Max loss

(Spread Width − Net Credit) × 100. E.g., ($10 − $2.30) × 100 = $770.

Breakeven

Short Put Strike − Net Credit. E.g., $420 − $2.30 = $417.70.

When to use

When you're moderately bullish to neutral and want to collect credit with clearly defined, limited risk.

When to avoid

Before negative catalysts (earnings misses, macro events) or when expecting a sharp decline through the short put strike.

Example trade

Stock: SPY at $430
Sell 1 SPY $420 Put at $3.50
Buy 1 SPY $410 Put at $1.20
Net Credit: $2.30 ($230)
Expiration: 35 days

Max Profit: $230 (if SPY stays above $420)
Max Loss: ($420 - $410 - $2.30) × 100 = $770
Breakeven: $420 - $2.30 = $417.70

If SPY stays at $428: Both puts expire worthless, keep $230
If SPY falls to $408: Max loss = $770

Common mistakes

×Choosing a short put strike too close to the current price for a tiny extra credit — not enough cushion for normal fluctuation.
×Entering before earnings or major macro events that can gap the stock through your short strike.
×Taking on too much width (e.g., $20 spread) for only $2 of credit — poor risk/reward ratio.
×Not closing the spread when max loss is imminent — holding and hoping for a reversal.
×Ignoring that the long put provides no benefit if the stock stays between the two strikes.

FAQ

Should I close the spread before expiration?

Yes, many traders close when they've captured 50% of the max profit. This removes risk of a late reversal and frees up capital.

How does a bull put spread differ from a cash-secured put?

A cash-secured put has larger max loss (you buy all shares at the short strike). A bull put spread caps max loss at the spread width because the long put hedges below.

What happens at expiration if I do nothing?

If both puts expire worthless (stock above short strike), you keep the credit. If the short put is in-the-money, you may be assigned — close before expiration to avoid this.