OptionsAcademy

A bull put spread is a vertical spread where you sell a put at a higher strike and buy a put at a lower strike, both expiring the same month.

How It Works

Apple at $150:

• Sell $150 put for $4
• Buy $145 put for $1
• Collect $3 net credit ($300 per contract)

Maximum profit: $3 per share ($300) if stock stays above $150. Maximum loss: $2 per share ($200) if stock falls below $145. Breakeven: $147 ($150 - $3 credit).

Why Use It

• Collect premium upfront (credit spread)
• Limited risk (defined at entry)
• High probability (wide range profitable)
• Profits from time decay and sideways movement

Risk Profile

Maximum Profit: Credit collected

Maximum Loss: Width of strikes minus credit

Profitable Zone: Above the sold strike at expiration

When to Use

Use when bullish or neutral. You profit from the stock staying flat or rising. Time decay works for you.

Management

• Close at 50% max profit (collect $150 instead of $300)
• Roll down if stock falls toward sold strike
• Let expire if OTM

Related: Bear Put Spread, Bull Call Spread, Vertical Spread