Bull put spread: the defined-risk way to sell puts

A bull put spread is a defined-risk credit strategy: you sell a put at a higher strike and buy a put at a lower strike in the same expiration. Max profit is the net credit received; max loss is the strike width minus that credit. It reaches max profit if the stock closes at or above the short strike.

How a bull put spread is built

A bull put spread (also called a put credit spread) has exactly two legs, both puts, both in the same expiration:

Sell one put at a higher strike — this leg collects premium and carries the obligation.
Buy one put at a lower strike — this leg costs less premium and caps your downside.

Because the put you sell is closer to the stock price than the put you buy, it is worth more, so the position opens for a net credit. That credit is the most you can make. The long put is not decoration — it is the insurance that turns an undefined-risk short put into a position with a hard maximum loss.

The three numbers that define the trade

Max profit = net credit received. Achieved if the stock closes at or above the short strike at expiration, so both puts expire worthless.
Max loss = (strike width − net credit) × 100. Hit if the stock closes at or below the long strike at expiration.
Breakeven = short strike − net credit. Below this price at expiration, the position loses money.

Most brokers hold collateral (buying power) equal to the max loss while the spread is open.

Worked example (hypothetical)

All numbers below are hypothetical, for illustration only. Suppose stock XYZ trades at $105 and you open a 30-day bull put spread:

Sell the $100 put for $2.50
Buy the $95 put for $1.10
Net credit: $1.40 per share = $140 per spread
Strike width: $5.00, so max loss = ($5.00 − $1.40) × 100 = $360
Breakeven: $100 − $1.40 = $98.60

XYZ at expiration	Short $100 put	Long $95 put	P/L per spread (hypothetical)
$105 (or any price ≥ $100)	Expires worthless	Expires worthless	+$140 (max profit)
$98.60	Worth $1.40	Expires worthless	$0 (breakeven)
$97.00	Worth $3.00	Expires worthless	−$160
$95.00 or below	Worth $5.00 or more	Worth $0 or more — offsets losses below $95	−$360 (max loss)

Check the intrinsic-value math yourself: a put's value at expiration is max(0, strike − stock price). At $97, the short $100 put is worth $3.00 and the long $95 put is worth $0, so closing costs $300 against the $140 collected: a $160 loss.

The risk/reward is asymmetric. This spread risks $360 to make $140. Ignoring commissions, and assuming every winner keeps the full credit while every loser takes the full max loss, it needs a win rate of about 72% (360 ÷ 500) just to break even over many trades. Credit spreads tend to win often and lose bigger when they lose — a high win rate alone is not evidence of edge. See what the research says about retail options outcomes.

When traders use it

A bull put spread expresses a neutral-to-bullish view: the stock does not need to rise, it just needs to not fall below the short strike. Common contexts include selling spreads below a support level, or when implied volatility is elevated and premiums are richer. Because both legs lose extrinsic value as expiration approaches, the position generally benefits from theta decay when the stock cooperates. None of this guarantees a profit — a sharp drop through both strikes produces the full max loss, and options positions can lose 100% of the capital at risk.

Assignment risk

Equity options are American-style, so the short put can be assigned before expiration — most likely when it is deep in the money with little extrinsic value left. Two situations deserve attention:

Early assignment: you buy 100 shares per contract at the short strike. Your long put still limits the total loss, but the share purchase can exceed your cash and create a margin call in a smaller account.
Pin risk at expiration: if the stock closes near the short strike, you may be assigned on the short leg while the long leg expires worthless, leaving an unhedged share position over the weekend.

Many traders close spreads before expiration week specifically to avoid pin risk, rather than holding for the last few cents of credit.

Managing the position

Define the exit before entry. A common approach is closing at a set percentage of max profit or a set multiple of the credit as a loss point — decide the numbers first, then follow them.
Watch the short strike, not the P/L. The trade thesis is "stock stays above X." If that breaks, the original reason for the trade is gone.
Rolling (closing this spread and opening one at later expiration or lower strikes) collects more credit but adds time in the trade; it is a new decision, not a repair guaranteed to work.

You can model the payoff for your own strikes with the free calculators at /tools/. Compare the debit-side alternative in our bull call spread guide, or the bearish mirror image, the bear put spread.

Education and research only — not financial advice, and ClaudeQuantAlgo is not a registered investment adviser. Options trading is high-risk and most retail traders lose money.

Common questions

What is a bull put spread?

A bull put spread is a defined-risk options strategy where you sell a put at a higher strike and buy a put at a lower strike in the same expiration, collecting a net credit. Max profit is the credit; max loss is the strike width minus the credit. It profits if the stock stays at or above the short strike through expiration.

How do you calculate max loss on a bull put spread?

Max loss = (difference between the strikes − net credit received) × 100 per spread. Example: sell a $100 put and buy a $95 put for a $1.40 credit — max loss is ($5.00 − $1.40) × 100 = $360, reached if the stock closes at or below $95 at expiration. Brokers typically hold this amount as collateral.

What happens if the short put in my spread gets assigned?

You buy 100 shares per contract at the short strike. The long put still caps your total loss at the defined maximum, but the share purchase can exceed a small account's buying power and trigger a margin call. Early assignment is most likely when the short put is deep in the money with little extrinsic value remaining.

Is a bull put spread better than selling a naked put?

Neither is inherently better. The spread caps risk at a known maximum and requires far less collateral, but the long put reduces the credit collected. A naked put collects more premium while exposing you to losses down to a stock price of zero. Which trade-off fits depends on account size, approval level, and risk tolerance — and both can lose money.

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Last updated 2026-07-15 · ClaudeQuantAlgo Research Desk · research and education only.

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