Bull Put Spread Explained
A bull put spread sells a put and buys a lower one for a net credit: a defined-risk, mildly bullish trade that profits if the stock holds above the short strike.
What it is
A bull put spread, also called a credit put spread, sells one put and buys another put at a lower strike in the same expiration. You collect a net credit and keep it if the underlying finishes above the short put strike. The long lower put caps your loss, so unlike a naked short put or cash-secured put the risk is defined and known in advance. It is a mildly bullish income trade: you win if the stock rises, holds, or even falls a little, as long as it stays above the short strike into expiration. It is the defined-risk way to express the same view as a cash-secured put.
Payoff at expiration
When to use it
Use a bull put spread when you are mildly bullish or neutral on a name and implied volatility is elevated so the credit is rich. It suits a view that a stock has support above the short strike and is unlikely to break it before expiry. Traders favour it over a naked short put when they want to cap the downside and free up margin, accepting a smaller credit for defined risk. Place the short strike below support or at a delta you are comfortable defending, choose about 30 to 45 days, and avoid holding through a catalyst that could gap the stock through the spread.
Greeks profile
| Delta | Positive. The position gains as the underlying rises and is structurally long the stock in exposure terms. |
| Gamma | Short gamma near the short strike, where the payoff bends as expiration approaches. |
| Theta | Positive. Time decay works in your favour as long as the underlying stays above the short strike. |
| Vega | Negative. Falling implied volatility helps the position; a spike raises the cost to close it. |
Max profit, max loss & break-evens
Max profit = net credit received, kept if the underlying finishes at or above the short put strike. Max loss = width between strikes − net credit, realised below the long put strike. Break-even = short put strike − net credit received.
Concrete example
A stock trades at 100. You sell the 95 put for 2.20 and buy the 90 put for 0.70, a net credit of 1.50. Max profit is that 1.50, kept if the stock finishes above 95. Max loss is the 5-point width minus the 1.50 credit, so 3.50, realised if the stock closes below 90. Your break-even is 93.50. You have risked 3.50 to make 1.50 on a view that the stock holds above 95.
Risks & management
The defined loss is capped by the long put, but it is larger than the credit, so a break below the short strike hurts more than a single winning trade earns. The main failure mode is a sharp drop through the spread, where you take close to the full width. Manage by closing or rolling the spread down and out when the underlying tests the short strike, taking profit early when most of the credit is gone, and sizing so a maximum loss is survivable. Assignment on the short put is possible if it goes in-the-money near expiry; the long put protects the net position.
You are reading the free part.
The full breakdown — how it is calculated, why it matters, and a worked example — is just below. Tell us where to send it and keep reading. It is free.
No spam. Your access to the full CrossVol glossary, and the Terminal that powers it.
Key terms
Trade this structure with the CrossVol Terminal
Screen the setup, read dealer positioning and live Greeks, and size it against real IV rank — all in one workspace.
Launch the CrossVol Terminal — $99/mo