What is a bull put spread?
A bull put spread, also called a short put vertical, collects a credit. You sell a put at a higher strike and buy a put at a lower strike for protection.
The long put is what caps the damage. Without it you would be exposed all the way down. With it, the worst case is the strike width minus the credit you took in.
When traders use it
Traders sell put spreads when they want to be paid for a floor rather than pay for a target.
- You think the stock holds above a support level into expiration.
- Implied volatility is elevated and premium is worth selling.
- You want time decay working for you rather than against you.
The P/L shape
The payoff is flat and positive above the short strike, then ramps down between the strikes and goes flat again below.
Worked example. XYZ trades at $100. You sell the $95 put and buy the $90 put for a credit of $1.30, or $130.
- Max profit
- $130 — the credit, if XYZ closes at or above $95
- Max loss
- $370 — the $500 strike width minus the credit
- Breakeven
- $93.70 — short strike minus the credit
You risk $370 to make $130. That is a common shape for credit spreads: you win more often than you lose, and the losses are larger than the wins.
Greeks and time decay
Net delta is positive — the spread wants the stock up, or at least still. It is small while the stock is far above the strikes and grows sharply as price approaches the short put.
Theta is positive and it is the main engine of the trade. Vega is negative, so falling implied volatility helps. Both work best in the final weeks, which is why these spreads are often sold with 30 to 45 days left.
Build it in DeltaForm
- Open the builder and choose the symbol and expiration.
- Add a short put below the current price.
- Add a long put at a lower strike, same expiration.
- Confirm the credit and read the breakeven off the curve.
- Step the date forward to watch the credit decay toward your maximum profit.
Frequently asked questions
What happens if the stock closes between the strikes?
The short put is in the money and the long put is not. The loss falls somewhere between zero and the maximum, depending on where price lands. Expect assignment on the short leg.
Why not just sell a naked put?
A naked put has far larger risk and much larger margin. The long put costs part of your credit and turns an open-ended risk into a number you can state before you enter.
How do I pick the short strike?
Delta is the usual shorthand — a 20-delta short put means roughly a 20% chance of finishing in the money. Lower delta means less credit and a higher chance of keeping it.