Bull Put Spread

The bull put spread option trading strategy is employed when the options trader thinks that the price of the underlying asset will go up moderately in the near term. The bull put spread options strategy is also known as the bull put credit spread as a credit is received upon entering the trade.

Bull Put Spread Construction
Buy 1 OTM Put
Sell 1 ITM Put

Bull put spreads can be implemented by selling a higher striking in-the-money put option and buying a lower striking out-of-the-money put option on the same underlying stock with the same expiration date.

Limited Upside Profit

If the stock price closes above the higher strike price on expiration date, both options expire worthless and the bull put spread option strategy earns the maximum profit which is equal to the credit taken in when entering the position.

The formula for calculating maximum profit is given below:

  • Max Profit = Net Premium Received - Commissions Paid
  • Max Profit Achieved When Price of Underlying >= Strike Price of Short Put
Bull Put Spread Payoff Diagram
Graph showing the expected profit or loss for the bull put spread option strategy in relation to the market price of the underlying security on option expiration date.

Limited Downside Risk

If the stock price drops below the lower strike price on expiration date, then the bull put spread strategy incurs a maximum loss equal to the difference between the strike prices of the two puts minus the net credit received when putting on the trade.

The formula for calculating maximum loss is given below:

  • Max Loss = Strike Price of Short Put - Strike Price of Long Put Net Premium Received + Commissions Paid
  • Max Loss Occurs When Price of Underlying <= Strike Price of Long Put

Breakeven Point(s)

The underlier price at which break-even is achieved for the bull put spread position can be calculated using the following formula.

  • Breakeven Point = Strike Price of Short Put - Net Premium Received

Bull Put Spread Example

An options trader believes that XYZ stock trading at $43 is going to rally soon and enters a bull put spread by buying a JUL 40 put for $100 and writing a JUL 45 put for $300. Thus, the trader receives a net credit of $200 when entering the spread position.

The stock price of XYZ begins to rise and closes at $46 on expiration date. Both options expire worthless and the options trader keeps the entire credit of $200 as profit, which is also the maximum profit possible.

If the price of XYZ had declined to $38 instead, both options expire in-the-money with the JUL 40 call having an intrinsic value of $200 and the JUL 45 call having an intrinsic value of $700. This means that the spread is now worth $500 at expiration. Since the trader had received a credit of $200 when he entered the spread, his net loss comes to $300. This is also his maximum possible loss.

Note: While we have covered the use of this strategy with reference to stock options, the bull put spread is equally applicable using ETF options, index options as well as options on futures.


For ease of understanding, the calculations depicted in the above examples did not take into account commission charges as they are relatively small amounts (typically around $10 to $20) and varies across option brokerages.

However, for active traders, commissions can eat up a sizable portion of their profits in the long run. If you trade options actively, it is wise to look for a low commissions broker. Traders who trade large number of contracts in each trade should check out OptionsHouse.com as they offer a low fee of only $0.15 per contract (+$4.95 per trade).

Similar Strategies

The following strategies are similar to the bull put spread in that they are also bullish strategies that have limited profit potential and limited risk.

The Collar Strategy
Costless Collar (Zero-Cost Collar)
Bull Call Spread

Bull Spread on a Debit

The bull put spread is a credit spread as the difference between the sale and purchase of the two options results in a net credit. For a bullish spread position that is entered with a net debit, see bull call spread.

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