Bull Put Spread
Sell a put and buy a lower-strike put to collect premium with a bullish bias and capped, defined risk.
What is a Bull Put Spread?
A Bull Put Spread (credit put spread) sells a higher-strike put and buys a lower-strike put for protection. You receive a net credit upfront, which is your maximum profit if the underlying stays above the short strike at expiry. The long put caps your loss. It profits from time decay and a stable-to-rising market — a favourite income strategy of premium sellers.
Payoff Diagram
Profit & Loss at expiry
Per share (multiply by lot size 75). Gold dots mark breakeven points; green = profit, red = loss.
Construction
- Sell 1 OTM Put (higher strike) — collect premium.
- Buy 1 further-OTM Put (lower strike) — protection.
- Net credit received = maximum profit.
When to Use It
Use when you are neutral-to-bullish and expect the underlying to hold above a support. Best entered in high-IV environments where you collect rich premium and benefit from IV mean-reversion and Theta.
The Greeks
Positive Delta, Positive Theta (time decay helps you), Negative Vega (falling IV helps).
Risks & Considerations
- Loss can be several times the credit if the underlying falls through both strikes.
- A sharp gap-down can push the position to maximum loss quickly.
- Assignment on the short put if it goes ITM before expiry (stock options).
Worked Example (Nifty)
Illustrative trade — lot size 75
Nifty 20,000. Sell 20,000 PE ₹200, buy 19,600 PE ₹90. Net credit ₹110 (₹8,250 = max profit) if Nifty stays ≥ 20,000. Max loss = (400 − 110) × 75 = ₹21,750 below 19,600. Breakeven = 19,890.