Bull Put Spread

What Is a Bull Put Spread?

A bull put spread involves selling a put option at a higher strike price and simultaneously buying a put option at a lower strike price, both with the same expiration. This is a credit strategy—you collect money upfront and profit if the stock stays above your short strike.

Quick Stats:

• Max Loss: Spread width minus credit received
• Max Profit: Credit received (keep if stock stays above short strike)
• Breakeven: Short put strike - credit received
• Best For: Bullish or neutral outlook, collecting premium

When to Use a Bull Put Spread

✅ Ideal Conditions

• Stock is bullish or range-bound above support
• High implied volatility (juicy premiums)
• Clear support level below current price
• Want to collect premium instead of paying for calls
• Expect stock to stay flat or rise

❌ Avoid When

• Stock breaking major support levels
• Bearish momentum building
• IV is very low (small premiums)
• Uncertain market conditions
• Already have too many short positions

How Bull Put Spreads Work

The Two Legs

Leg 1 (Short Put): Sell put at higher strike (collect premium)

Leg 2 (Long Put): Buy put at lower strike (protection)

You collect a credit upfront and profit if the stock stays above your short strike.

Credit Structure

ComponentExampleAmountSell $95 put+$2.50+$250Buy $90 put-$1.00-$100Net Credit$150Max ProfitCredit received$150Max Loss($95-$90) - $1.50$350

Breakeven: $95 - $1.50 = $93.50

How to Set Up a Bull Put Spread

Step 1: Select Your Short Put Strike

Below Current Price:

• Choose support level or psychological round number
• Further OTM = safer but less premium
• Closer to price = more premium but higher risk

Example: Stock at $100

• Conservative: Sell $90 put (10% cushion)
• Moderate: Sell $95 put (5% cushion)
• Aggressive: Sell $98 put (2% cushion)

Most common: Sell put 5-10% below current price at technical support.

Step 2: Select Your Long Put Strike (Protection)

Spread Width Options:

WidthRisk/RewardBest For$5 wideLower risk, lower creditConservative, smaller accounts$10 wideBalancedMost common setup$15+ wideHigher risk, more creditLarger accounts, higher risk tolerance

Standard approach:

• Sell put at support
• Buy put $5-10 below for protection

Example: Stock at $100

• Sell $95 put
• Buy $90 put
• Width: $5 ($500 max risk, $150 credit)

Step 3: Choose Expiration

• 30-45 DTE: Sweet spot for theta decay
• 0-7 DTE (Zero DTE): Maximum theta decay, highest risk
• 60+ DTE: Slower decay, more premium collected

Recommended: 30-45 days for balance, or 0-7 DTE for aggressive traders.

Step 4: Execute the Trade

1. Enter as a single order (not two separate trades)
2. Select "Bull Put Spread" or "Vertical Spread"
3. Use limit order on the net credit
4. Example: Set limit at $1.55 if mid-price is $1.50

Risk and Reward Breakdown

Maximum Profit

Formula: Net credit received

Example:

• Sell $95 put for $2.50
• Buy $90 put for $1.00
• Net credit: $1.50 ($150)
• Max profit: $150

Occurs when: Stock closes at or above short put strike at expiration.

Maximum Loss

Formula: (Spread Width × 100) - Net Credit

Example:

• Spread width: $5 ($500)
• Net credit: $1.50 ($150)
• Max loss: $500 - $150 = $350

Occurs when: Stock closes at or below long put strike at expiration.

Breakeven Point

Formula: Short put strike - net credit

Example:

• Short put: $95
• Net credit: $1.50
• Breakeven: $93.50

Stock can drop to $93.50 and you still break even.

Profit Zones Explained

Example: $95/$90 Bull Put Spread for $1.50 credit

Stock Price at ExpirationResult$95 or higherMax profit: +$150$93.50-$95Partial profit: $0 to +$150$93.50Breakeven: $0$90-$93.50Partial loss: $0 to -$350Below $90Max loss: -$350

Key insight: You profit as long as stock stays above $93.50. You have a cushion below your short strike.

Real Trade Example

Setup: SPY Support Bounce

• SPY at $500, bouncing off $495 support
• Strong uptrend intact
• IV Rank: 45 (elevated premiums)
• Support holds for 3 weeks historically

Trade:

• Sell $490 put for $2.80
• Buy $485 put for $1.20
• Net credit: $1.60 ($160)
• Expiration: 30 DTE
• Max profit: $160 | Max loss: $340
• Position size: 3 spreads ($1,020 max risk = 2% of $51k account)

Management:

• Profit target: 50% ($80 per spread)
• Close if SPY breaks below $490 support

Outcome:

• Day 15: SPY at $508, spread worth $0.40
• Buy back at $0.40 = $120 profit per spread
• Total: $360 profit (35% return on $1,020 risk in 15 days)

Why exit early? Captured 75% of max profit, reduced risk, freed capital for next trade.

The Greeks: How They Affect Your Spread

Delta: Net Directional Exposure

Bull put spreads have positive delta (profit from upward moves).

Example:

• Short $95 put: +0.30 delta (you're short puts = positive delta)
• Long $85 put: -0.15 delta
• Net spread delta: +0.15

Meaning: Stock moves $1 up → Spread gains $0.15 in value ($15)

Theta: Time Decay (YOUR FRIEND)

The advantage: You WANT time decay.

• Short put loses value daily (you profit)
• Long put loses value daily (you lose)
• Net theta: Positive

Result: Every day that passes, you make money if stock doesn't move.

Example:

• Net theta: +0.05
• Each day = $5 profit from decay alone
• 30 days × $5 = $150 (your max profit)

Vega: Volatility Sensitivity (Slightly Negative)

Impact: You're a net seller, so rising IV hurts slightly.

• Short put gains value from IV rise (bad for you)
• Long put gains value from IV rise (good for you)
• Net vega: Slightly negative

Strategy: Enter when IV is high, profit when it contracts.

Managing Bull Put Spreads

Taking Profits Early

Profit Target Guidelines:

• Conservative: 25% of max credit
• Standard: 50% of max credit
• Aggressive: 75% of max credit

Example:

• Collected $150 credit
• Exit at 50%: Buy back spread for $75
• Keep $75 profit, eliminate $350 risk

Why exit early? Last 50% of profit takes 90% of the time. Free up capital and reduce risk.

Cutting Losses

Stop Loss Guidelines:

• Technical: Close if stock breaks support
• Percentage: Close at 2x credit (e.g., $150 credit, close at $300 loss)
• Time-based: Close with 7 DTE if threatened

Example:

• Collected $150 credit ($150 max profit)
• Stock approaching short strike
• Buy back spread for $350 (max loss)
• Accept $200 loss, move on

Rolling Down and Out

If stock drops but you're still bullish:

How:

• Buy back current spread
• Sell new spread at lower strikes, further expiration
• Collect additional credit

Example:

• Original: $95/$90 spread for $150 credit, now worth $400 (losing)
• Buy back for $400 → Realize $250 loss
• Sell $90/$85 spread (45 DTE) for $180 credit
• Net loss reduced to $70, more time for recovery

Risk: You're doubling down. Only roll if thesis still valid.

Bull Put Spread vs Bull Call Spread

FactorBull Put SpreadBull Call SpreadTypeCredit (collect money)Debit (pay money)ThetaPositive (helps you)Negative (hurts you)Best IVHigh (more premium)High (reduces cost)PsychologyDefensive (profit if flat/up)Offensive (need upward move)Assignment RiskYes (short puts)No (long calls)Capital EfficiencyBetterLower

Use put spread when: High IV, want income, expect flat-to-bullish

Use call spread when: Want upside participation, no assignment concerns

Position Sizing Strategy

Formula: (Account × 2%) ÷ Max Loss per Spread = Number of Spreads

Examples:

Account SizeMax Risk (2%)Spread Max LossMax Spreads$10,000$200$3500 (spread too wide)$25,000$500$3501$50,000$1,000$3502

Important: Max loss is larger than credit received. Size accordingly.

Common Mistakes

1. Selling Puts Too Close to Price

❌ Stock at $100, sell $99 put for huge premium

✅ No cushion if stock dips even 1%

Fix: Sell puts at support 5-10% below current price

2. Holding for Max Profit

❌ Collected $150, spread now worth $30, holding for last $30

✅ Risking $350 to make final $30

Fix: Close at 50-75% max profit

3. Not Rolling When Wrong

❌ Stock breaks support, holding and hoping

✅ Turning small loss into max loss

Fix: Roll down/out or take loss and move on

4. Selling in Low IV

❌ IV Rank 15, collecting $50 credit

✅ Not enough premium to justify risk

Fix: Only sell premium in high IV (IV Rank >40)

5. Ignoring Assignment Risk

❌ Short put goes ITM, surprised by 100 shares assigned

✅ Account not ready for assignment

Fix: Close ITM spreads before expiration

Zero DTE Bull Put Spreads

High-risk, high-reward version:

Why Traders Love 0DTE

• Collect premium in hours, not weeks
• Maximum theta decay (time working hardest for you)
• Can trade daily for consistent income
• Lower capital requirements per trade

0DTE Setup Example

SPY at $500 at 10 AM:

• Sell $495 put (1% OTM)
• Buy $490 put
• Credit: $0.60 ($60)
• Max loss: $440
• Expiration: 4 PM same day

Management:

• Exit at 50% profit ($0.30 buyback)
• Stop loss if SPY breaks $495
• Close by 3 PM regardless (avoid gamma risk)

Risk: Extreme gamma. Stock can gap through your strikes in final hour.

Quick Setup Checklist

Before entering any bull put spread:

✅ Stock bullish or neutral, above support

✅ IV Rank >40 (high premiums available)

✅ Short strike at or below strong support

✅ Long strike $5-10 below short strike

✅ Expiration 30-45 DTE (or 0-7 for aggressive)

✅ Credit covers at least 20-30% of spread width

✅ Exit at 50% max profit

✅ Stop loss at 2x credit or support break

✅ Position size ≤ 2% account risk

✅ Understand assignment risk if short put goes ITM

Key Takeaways

• Bull put spreads collect credit upfront by selling puts at support
• Max profit = credit received | Max loss = (spread width - credit) × 100
• Breakeven = short strike - credit received
• Theta decay works FOR you—profit from time passing
• Best in high IV environments (IV Rank >40)
• Target 50% of max profit for optimal risk-reward
• Stock can drop to breakeven and you still don't lose
• Exit 7 days before expiration or at profit target
• Position size carefully—max loss exceeds credit received
• Can trade 0DTE for daily income but extreme risk

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