Bull Put Spread: How It Works, With Example
A bull put spread is a credit spread: you sell a put option and buy another put with a lower strike on the same stock and expiration. You collect a net credit up front and keep it if the stock closes above the short put strike at expiration. The long put caps your loss, so you know the worst case before you enter.
How it works
- Pick a stock you expect to hold steady or rise, and an expiration about 30 to 45 days out.
- Sell one put below the current price (the short strike). This is where the credit comes from.
- Buy one put with a lower strike on the same expiration (the long strike). This caps your risk.
- Keep the net credit if the stock stays above the short strike, or close early to lock in part of it.
When to use it
Use it when you are neutral to moderately bullish - for example after a pullback toward support. The stock doesn't need to rise; it only needs to stay above the short strike. Time decay works in your favor every day the stock holds.
Profit, loss and breakeven
Max profit
The net credit received.
Max loss
Strike width minus the net credit, times 100 per contract.
Breakeven at expiration
Short put strike minus the net credit.
Example trade
XYZ trades at $100. You sell the $95 put for $2.40 and buy the $90 put for $0.80, a net credit of $1.60 ($160 per contract). Max profit is $160 if XYZ stays above $95. Max loss is $340 ($5 width minus $1.60, times 100) if it falls below $90. Breakeven is $93.40.
Bull Put Spread on the Strategy Price Timeline
Example on a $100 stock with 35 days to expiration. The shaded bands show where the stock needs to be at expiration for the trade to profit, partially lose or reach the max loss - the same chart every EasyTrade signal shows.
Swipe to see full chart →Profit zone
Transition zone
Loss zone
Risks to know
- A sharp drop below the long strike produces the maximum loss, which is usually larger than the maximum profit.
- If the stock is below the short strike near expiration, you can be assigned early and end up holding shares.
- Earnings and news can gap the stock through both strikes overnight, before you have time to react.
How EasyTrade manages it
EasyTrade closes bull put spread signals at 60% of max profit and exits several days before expiration to avoid assignment risk. On the Diamond plan, open spreads sent to tastytrade are closed automatically at 5 days to expiration.
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