Bull Put Spread: The Complete Beginner Guide to the Put Credit Spread (With Examples)
If you’re bullish on a stock, or you simply think it won’t drop much, the bull put spread is one of the cleanest ways to trade that view with defined risk.
This strategy is also called a put credit spread or short put spread because you collect option premium up front. Your goal is simple: let time pass while the stock holds above your strikes.
In this guide, you’ll learn how a bull put spread works, how profits and losses are calculated, when to use it, and what to watch for at expiration.
What Is a Bull Put Spread?
A bull put spread is a vertical spread built with two put options that share the same expiration date.
You sell a put at a higher strike price and buy a put at a lower strike price.
Because the put you sell is more expensive than the one you buy, the trade is usually entered for a net credit. That credit represents the maximum profit potential.
This same strategy may also be referred to as a put credit spread, short put spread, or selling a put spread.
How the Bull Put Spread Makes Money
A bull put spread profits when the stock price rises, stays flat, or drops slightly, as long as it remains above a key level by expiration.
This is why the strategy is considered high probability. You do not need a big rally. You mainly need the stock to avoid a significant breakdown.
Bull Put Spread Risk Profile
Before placing a trade, you should always calculate three numbers: maximum profit, maximum loss, and breakeven price.
Maximum Profit
Maximum profit equals the credit received multiplied by 100.
Since you collect premium up front, the best-case scenario is that both options expire worthless and you keep the entire credit.
Maximum Loss
Maximum loss equals the spread width minus the credit received, multiplied by 100.
The spread width is the difference between the two strike prices.
Breakeven Price
Breakeven is calculated by subtracting the credit received from the short put strike price.
If the stock price is above breakeven at expiration, the trade is profitable. Below breakeven, losses begin to accumulate until the maximum loss level is reached.
Bull Put Spread Example
⚡ Assume a stock is trading near $90.
⚡ You sell the 90 put for $5.09 and buy the 85 put for $2.84.
⚡ The net credit collected is $2.25.
⚡ Now calculate the key numbers.
⚡ Maximum profit is $2.25 multiplied by 100, which equals $225.
⚡ The spread width is $5.
⚡ Maximum loss is ($5 minus $2.25) multiplied by 100, which equals $275.
⚡ The breakeven price is $90 minus $2.25, which equals $87.75.
⚡ At expiration, if the stock finishes above $90, both puts expire worthless and you keep the full $225 credit.
⚡ If the stock finishes below $85, the spread reaches its maximum value and the loss is capped at $275.
⚡ If the stock finishes between $85 and $90, the trade results in a partial profit or partial loss depending on the closing price.
Why the Bull Put Spread Has Defined Risk
Selling a put by itself can generate more premium, but it also exposes you to much larger downside risk.
Adding the lower strike put caps the maximum loss and reduces margin requirements. While this lowers the premium collected, it provides a clear risk boundary and makes position sizing easier.
Closing a Bull Put Spread Before Expiration
You do not need to hold a bull put spread until expiration. You can close it at any time.
To close the trade, you buy back the put you sold and sell the put you bought.
For example, if you sell a spread for $7.60 and later buy it back for $4.00, the profit is $3.60 per contract, or $360 total.
What Happens at Expiration
There are two important expiration scenarios to understand.
If the stock finishes below both strikes, both puts are in the money and the spread settles near its maximum value. Your loss is capped.
If the stock finishes between the two strikes, the short put may be assigned while the long put expires worthless. This can result in receiving shares. Many traders avoid this situation by closing spreads before expiration when price is near the short strike.
When to Use a Bull Put Spread
This strategy works best when you are bullish to neutral, see a clear support level, want defined risk exposure, and prefer higher win rates with smaller profit targets.
It is less effective when the stock is in a strong downtrend, volatility is unstable, or major binary events are approaching.
Frequently Asked Questions
Is a bull put spread bullish?
Yes. The strategy benefits when the stock remains above the short strike price.
Why is it called a credit spread?
Because you receive premium up front when opening the position.
What is the best-case outcome?
Both options expire worthless and you keep the entire credit.
What is the worst-case outcome?
The spread reaches its maximum value and the loss is capped.
Do you have to hold until expiration?
No. You can close the position early to lock in profits or reduce risk.
Final Thoughts
The bull put spread is one of the most practical ways to generate income while maintaining defined risk. Time decay works in your favor and the strategy allows you to profit even when the stock does not move higher.
For traders who want structured risk and consistent probability-based setups, this strategy belongs in your core options toolkit.
Stay Connected!
Join our mailing list to get notified of all new blog posts, and receive the latest news and updates from our team.
