Bull Put Credit Spread
Sell a put and buy a cheaper, lower-strike put on the same expiration. You collect a credit and profit if the stock stays above the short strike.
Written by the MarketWrench team. Examples are worked with the same Black-Scholes model used in our calculators (4% rate, no dividends unless stated) and are reviewed for accuracy before publishing. How we create content.
Payoff at expiration
When traders use it
You are neutral to moderately bullish and want defined risk with less capital than a cash-secured put.
Formulas (per share; ×100 per contract)
| Max profit | Net credit |
| Max loss | (Short strike − long strike) − net credit |
| Breakeven | Short strike − net credit |
Key risks
Max loss is usually several times the max profit, so a few losers can erase many winners. Early assignment on the short put is possible.
How it works
Sell one put near or below the current price and buy one put further below it, same expiration. The credit is yours if both expire out of the money. If the stock falls below the long strike, the long put limits the damage to the strike width minus the credit.
Worked example HYPOTHETICAL
Hypothetical example only — not real prices or a recommendation. Stock at $100. Sell the 30-day $95 put for $1.33 and buy the $90 put for $0.40. Net credit $0.93 ($93). Max loss ($5 − $0.93) × 100 = $407. Breakeven $94.07.
| Stock price at expiration | P/L (1 contract, excl. fees) |
|---|---|
| $85 | −$407 |
| $90 | −$407 |
| $94.07 | $0 |
| $95 | +$93 |
| $100 | +$93 |
| $110 | +$93 |
Market outlook: when to use it
Use when: Neutral to bullish; you expect the stock to hold above a support level through expiration. High IV makes the credit larger.
Avoid when: You expect a sharp drop, or there is a big event (like earnings) you don't want to be exposed to.
The Greeks, in plain words
| Delta | Positive: gains as the stock rises. |
| Theta | Positive: time decay helps you. |
| Vega | Negative: falling IV helps. |
| Gamma | Negative: sharp moves near the short strike hurt. |
Choosing strikes and expiration
Many traders sell the short put around 0.20–0.30 delta and choose a strike width they can afford to lose. 30–45 days is common. Wider strikes mean more credit but a larger max loss. See how to pick a strike and expiration.
Managing the trade
Common rules: take profit at 50% of the credit, close or roll if the short strike is breached, and close before expiration if the stock sits between the strikes to avoid assignment.
Common mistakes
- Choosing strikes only for a big credit, ignoring the max loss.
- Holding through expiration with the stock between the strikes.
- Trading illiquid options where the bid-ask spread eats the credit.
FAQ
How much capital does it need?
Typically the max loss: strike width × 100 minus the credit, here $407.
Is it the same as a cash-secured put?
Similar view, but the long put caps the loss and the capital required is far smaller.
Explained simply
You are paid $93 now, and in exchange you promise to buy the stock at $95. A second contract lets you sell at $90, so you can never lose more than $407.
Not financial advice
This page is for educational and informational purposes only. It is not financial, investment, tax, or legal advice, and it is not a recommendation to buy or sell any security or to use any strategy. All examples use hypothetical numbers. Options involve risk and are not suitable for everyone. Do your own research and consider talking to a licensed professional before trading.
Read next
How to Pick a Strike and Expiration · Assignment and Early Exercise · All Learn articles
Related strategies
Cash-Secured Put · Bear Call Credit Spread · Iron Condor
Watch: further explanation
Video coming soon. Our Credit spreads walkthrough is in production. Meanwhile, browse the MarketWrench YouTube channel.
Calculators for this strategy
Options Profit Calculator · Probability of Profit Calculator · Assignment Risk Checker · IV Rank Calculator