Bull Put Spread
Short Put Vertical · Credit Put Spread
Overview
A bull put spread is a credit strategy for a market you expect to hold up or drift higher. You sell a put to collect premium and buy a further out-of-the-money put as insurance. The premium received is yours to keep as long as price stays above the strike you sold.
Because the long put caps the downside, this is a defined-risk way to be a put seller. You are effectively paid to take the view that the market will not fall below a chosen support level before expiry — and time decay works steadily in your favour.
How it’s built
Sell 1 higher-strike put (at or just out of the money) and buy 1 lower-strike put for protection, same expiry. The net premium is a credit; the strike gap defines the worst case.
| Action | Option | Strike | Premium | Role |
|---|---|---|---|---|
| Sell | Put (PE) | 24,000 | 170 | Sell — premium-collecting leg |
| Buy | Put (PE) | 23,800 | 80 | Buy — caps the downside |
Payoff at expiry
The diagram is computed from the legs above on an illustrative NIFTY 50 snapshot — spot 24,000, one lot of 75.
Worked example — NIFTY 50
NIFTY sits at 24,000 above a support shelf you respect. You sell the 24,000 put for 170 and buy the 23,800 put for 80, banking a net credit of 90 points (₹6,750 per lot).
If NIFTY holds at or above 24,000, both puts expire worthless and you keep the entire credit. Your loss only begins below the 23,930 breakeven and is capped at 110 points (the 200-wide spread minus the 90 credit) even if price collapses through 23,800.
At expiry
| If the market… | Outcome |
|---|---|
| NIFTY closes ≥ 24,000 | Full profit — keep the entire credit |
| NIFTY closes at 23,930 | Breakeven — losses cancel the credit |
| NIFTY closes ≤ 23,800 | Maximum loss — capped by the long put |
Greeks & behaviour
When to use it
- You are mildly bullish or expect a sideways-to-up market above a clear support.
- You want to be paid time decay with a strictly defined worst case.
- Implied volatility is elevated and you expect it to cool.
Risks & caveats
- A sharp break below support delivers the maximum loss quickly.
- Reward is limited to the credit, so win size is smaller than risk — discipline on win rate matters.
- Gap-downs through both strikes realise the full defined loss with no chance to adjust.
Key takeaways
- Get paid up front to back a support level holding.
- The long put converts naked put selling into a defined-risk trade.
- High-probability, limited-reward — position sizing is everything.
Test this on live data
Load the Bull Put Spread preset in the Strategy Builder to see real strikes, premiums and a live payoff graph.
Educational content only — not investment advice or a recommendation. All strikes, premiums and figures are illustrative and do not reflect live market quotes. Options carry significant risk; consult a registered adviser before trading.