Bull Put Spread Strategy — Guide, Credit & Calculator

A bull put spread is a credit spread strategy that involves selling a higher-strike put and simultaneously buying a lower-strike put in the same expiration. This creates immediate income from the net credit while limiting downside risk, making it ideal for neutral to bullish market outlooks.

Use the interactive chart below or jump to the setup guide to understand strike selection and credit optimization for stable or rising markets.

Interactive Payoff Chart

When to Use Bull Put Spreads

• Outlook: Neutral to moderately bullish; expecting stock to stay above support.
• Credit collection: Seeking income with defined maximum risk.
• Volatility: High IV environments provide better credit collection opportunities.
• Support levels: Strong technical support levels below current price.

Setup: Strike Selection & Credit Optimization

Two-Leg Construction

1. Sell put: Higher strike (closer to current price) for premium collection
2. Buy put: Lower strike (further OTM) for risk protection

Strike Selection Guidelines

• Short strike: 15-30 delta puts near support levels for optimal risk/reward.
• Long strike: 5-15 delta puts for maximum credit while maintaining protection.
• Strike width: Wider spreads increase both potential profit and maximum risk.
• Liquidity: Ensure both strikes have adequate volume and tight bid-ask spreads.

Expiration

• 30–45 DTE optimizes time decay benefits and credit collection.
• Avoid earnings dates unless comfortable with potential volatility expansion.
• Consider upcoming events that may impact support levels.

Want to optimize credit collection? Try the Bull Put Spread Calculator to compare strike combinations and profit probabilities.

Payoff, Breakeven & Greeks

• Max Profit: Net credit received (if stock stays above short strike).
• Max Loss: Strike width minus net credit received.
• Breakeven: Short strike minus net credit received.

Greeks

• Delta: Positive; benefits from rising stock prices.
• Theta: Positive; profits from time decay.
• Vega: Negative; hurt by rising implied volatility.
• Gamma: Negative near short strike; risk accelerates as stock falls.

Management & Assignment

• Profit taking: Close when capturing 25-50% of max credit to reduce risk.
• Assignment risk: Monitor short strike for early assignment, especially before earnings.
• Time-based: Consider closing 7-14 days before expiration to avoid gamma risk.
• Support breach: Have a plan if stock breaks below short strike.

Adjustment Techniques

• Rolling down: Move both strikes lower if stock declines but thesis remains intact.
• Rolling out: Extend time to allow for stock recovery.
• Conversion to iron condor: Add a call spread above for additional credit.
• Buy-to-close: Close early to avoid assignment when comfortable with profit.

Worked Example (Illustrative)

XYZ trading at $155. Set up bull put spread: Sell $150 put for $3.00, Buy $145 put for $1.50. Net credit received: $1.50.

• Max profit: $1.50 if XYZ stays above $150 at expiration.
• Max loss: $3.50 if XYZ falls below $145 ($5 width - $1.50 credit).
• Breakeven: $148.50 ($150 - $1.50 credit).
• Return on risk: 43% ($1.50/$3.50) if successful.

The strategy profits from time decay and benefits from stable or rising prices. Use the calculator to model different strike combinations and scenarios.

Frequently Asked Questions

Disclaimer

This page is for educational purposes only and is not investment advice. Options involve risk and are not suitable for all investors. Consider consulting a qualified professional. Examples are illustrative and exclude fees/slippage.

Sources & further reading: Cboe Options Education · OCC Investor Resources