Bull Put Spread Calculator & strategy guide

What is a bull put spread?

A bull put spread, also called a put credit spread, is a two-leg strategy for a neutral to bullish outlook. You sell a put at a higher strike, usually out of the money below the stock, and buy a put at a lower strike on the same underlying and expiration. The short put brings in more premium than the long put costs, so the position is opened for a net credit that represents your maximum profit.

The trade profits if the stock stays above the short strike through expiration, letting both puts expire worthless. The stock does not need to rally; a flat market or even a modest decline that stays above the short put still returns the full credit. Time decay works in your favor daily, and falling implied volatility shrinks the short put faster than the long put.

The payoff diagram is a flat plateau at the credit above the short strike, a falling diagonal between the strikes, and a flat floor at the maximum loss below the long strike. The long put is the insurance. It caps the downside at the strike width minus the credit, which is why a bull put spread requires a fraction of the margin of a naked short put.

Setup

Bull Put Spread example

XYZ trades at $100 with 40 days to expiration. You sell the $95 put for $2.50 and buy the $90 put for $1.00. The net credit is $1.50 per share, or $150 per spread. The strikes are $5 apart, so the spread can be worth at most $5.00, or $500.

Maximum profit is the $150 credit if XYZ finishes at or above $95. Maximum loss is $350 ($500 spread width minus $150 credit) if it finishes at or below $90. Breakeven is $93.50, so the stock can fall 6.5 percent before the trade loses money.

When to use a bull put spread

• You expect the stock to rise, hold steady, or at least stay above a support level through expiration.
• Implied volatility is elevated, often after a pullback, so put premiums are rich and likely to contract as the stock stabilizes.
• You want bullish exposure with a defined maximum loss and much lower margin than selling a naked put or buying shares.
• You would be comfortable owning the stock near the short strike, which makes a challenged spread easier to manage or convert.
• Typical entries use 30 to 45 days to expiration with the short put around the 20 to 30 delta, roughly 5 percent below the stock, and the long put one to two strikes lower.

Risks to understand

• The reward-to-risk ratio is skewed against you. In the example you risk $350 to make $150, so consistent profitability requires a high win rate and disciplined loss control.
• Stocks fall faster than they rise. A sharp drop or a downside gap can take the spread straight to maximum loss before you can react.
• Rising implied volatility, which usually accompanies a sell-off, inflates the short put and produces losses beyond what the stock move alone would suggest.
• The short put can be assigned early once it is in the money, leaving you long 100 shares and needing the capital to hold or the willingness to sell them.
• Gamma risk in the final week means a spread that is nearly at full profit can flip to a loss on a single bad day if the stock is near the short strike.

Managing the trade

• Many traders close the spread once they have captured 50 percent of the credit, which typically happens well before expiration and removes the late gamma risk.
• If the stock falls toward the short strike, the spread can be rolled down and out to a later expiration and lower strikes, ideally for an additional credit.
• Adding a bear call spread above the stock converts the position into an iron condor and collects extra premium to offset the challenged put side.
• Set a stop at roughly two times the credit received; a spread that has doubled against you is unlikely to recover before expiration.
• If you are willing to own the shares, a challenged short put can be left to be assigned and the long put sold, converting the trade into a stock position at an effective cost near the short strike minus the credit.

Bull Put Spread FAQs

How do you calculate bull put spread max loss and max profit?

Maximum profit is the net credit received, multiplied by 100 per contract. Maximum loss is the difference between the strikes minus the credit, also multiplied by 100. Selling a $95 put and buying a $90 put for a $1.50 credit gives a max profit of $150 and a max loss of $350.

Where is the breakeven on a bull put spread?

Breakeven is the short put strike minus the net credit. In the example that is $95 minus $1.50, or $93.50. At expiration the trade is profitable at any price above that level.

Bull put spread vs cash-secured put: which is better?

A cash-secured put collects more premium and has no cap on the downside other than the stock going to zero, so it requires the full strike price in cash. A bull put spread collects less but caps the loss at the strike width minus the credit and needs only that amount as margin. The spread gives a much higher return on capital; the cash-secured put is better if the real goal is to acquire the shares.

What happens if a bull put spread expires in the money?

If the stock is below both strikes, the short put is assigned and the long put is exercised, netting to zero shares and a cash loss equal to the width minus the credit. If the stock finishes between the strikes, only the short put is assigned and you will own 100 shares, so close the spread before expiration unless you want the stock.

Is a bull put spread a good strategy for beginners?

It is one of the more approachable premium-selling strategies because the loss is capped and the margin requirement is small and fixed. The main discipline required is closing losers early, since the maximum loss is larger than the maximum gain. Traders who can follow a rule such as exiting at two times the credit tend to do well with it.

Put credit spread vs call debit spread: what is the difference?

Both are bullish vertical spreads. The put credit spread, or bull put spread, pays you up front and wins if the stock stays above the short strike, so time decay is on your side. The call debit spread, or bull call spread, costs money up front and needs the stock to rise past its breakeven. Prefer the credit spread when implied volatility is high and the debit spread when it is low.

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