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Credit Spread Strategy: Bull Put & Bear Call Spreads
Defined-risk premium-selling. Put credit spread for bullish, call credit spread for bearish. 65-70% win rate.
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Quick answer
A put credit spread is bullish, a call credit spread is bearish. Both sell an OTM option and buy a further-OTM option of the same type for defined-risk premium income. Sold at 15–20 delta short strikes with 30–45 DTE, credit spreads historically win 60–70% of trades; closing at 50% max profit raises realized win rate to ~75%.
What is a Credit Spread?
A credit spread is an options strategy where you sell an option and buy a further out-of-the-money option of the same type, receiving a net credit. Maximum profit is the credit received, and maximum loss is defined.
Quick take. Credit spreads = Sell one option + Buy another option further OTM. You collect premium upfront (the "credit"). Your max loss is capped by the long option. Bull put spreads are bullish, bear call spreads are bearish. Profit if stock stays away from your short strike.
A credit spread sells one option and buys a further-out-of-the-money option for protection, collecting a net credit upfront — maximum profit is the credit received, maximum loss is the strike width minus the credit, both known at entry.
Credit Spread at a Glance
- Strategy type
- Directional (bullish or bearish)
- Legs
- 2 (sell option + buy further OTM option for protection)
- Max profit
- Net credit received
- Max loss
- Spread width minus credit received
- Typical win rate
- 60-70% (at 20-30 delta short strikes)
- Ideal IV environment
- High IV — sell expensive premium
- Best DTE
- 30-45 days to expiration
- Difficulty
- Beginner to Intermediate
- Capital needed
- $200-$1,000 per spread (depending on width)
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Best stocks for credit spreadsHow Do Credit Spreads Work?
A credit spread involves selling one option and buying a further out-of-the-money option for protection. You collect a net credit (premium) upfront. If the stock stays away from your short strike through expiration, you keep the full credit as profit.
There are two types: bull put spreads (sell a put, buy a lower put — bullish) and bear call spreads (sell a call, buy a higher call — bearish). Max loss is always: spread width minus credit received. Example: $5 wide spread with $1.50 credit = $3.50 max loss.
What is a Credit Spread?
A credit spread (also called a vertical spread) involves selling one option and simultaneously buying another option at a different strike price in the same expiration. You receive a net credit because the option you sell is more expensive than the option you buy.
The bought option acts as "insurance" - it caps your maximum loss. This makes credit spreads safer than naked options and more capital-efficient than cash-secured puts or covered calls.
Bull Put Spread (Bullish)
- Setup
- Sell a put, buy a lower put
- When to use
- Moderately bullish on stock
- Max profit
- Premium collected
- Max loss
- Spread width - Premium
- Profit if
- Stock stays above short put strike
Bear Call Spread (Bearish)
- Setup
- Sell a call, buy a higher call
- When to use
- Moderately bearish on stock
- Max profit
- Premium collected
- Max loss
- Spread width - Premium
- Profit if
- Stock stays below short call strike
Why Credit Spreads Are Popular
- Defined risk: You know your max loss before entering
- Lower capital requirements: Less margin than naked options
- High probability: Win rates of 60-70% when managed properly
- Positive theta: Earn money daily from time decay
- Flexible: Can be bullish or bearish, any underlying
Put Credit Spread vs Call Credit Spread: Quick Reference
A put credit spread and a call credit spread are the two variants of a vertical credit spread. Both collect a net credit and have defined risk. The only difference is directional bias.
Put Credit Spread
Also called: bull put spread, short put spread
Full guide: bull put spread — strike selection, SPY P&L example and management rules.
Direction: Moderately bullish or neutral
Construction: Sell a put at strike A. Buy a put at strike B (lower). Both options share the same expiration.
P&L profile:
- Max profit = net credit received
- Max loss = (Strike A − Strike B) × 100 − credit
- Breakeven = Strike A − net credit
- Profit zone: underlying closes above Strike A at expiration
When to use: Bullish thesis, elevated put IV skew (you're shorting expensive insurance the market is buying), 30–45 DTE.
Call Credit Spread
Also called: bear call spread, short call spread
Direction: Moderately bearish or neutral
Construction: Sell a call at strike A. Buy a call at strike B (higher). Both options share the same expiration.
P&L profile:
- Max profit = net credit received
- Max loss = (Strike B − Strike A) × 100 − credit
- Breakeven = Strike A + net credit
- Profit zone: underlying closes below Strike A at expiration
When to use: Bearish thesis, elevated call IV, post-rally exhaustion setups, 30–45 DTE.
When to Choose a Put Credit Spread vs Call Credit Spread
In a normal upward-sloping market with persistent put-skew, put credit spreads are typically the higher-edge trade — you're selling overpriced downside insurance the market consistently demands. Call credit spreads work best in capped, range-bound, or topping markets where call IV has expanded relative to puts.
Both are vertical credit spreads with identical risk-mechanics. Some traders run a "double" — a put credit spread and a call credit spread on the same underlying — which is structurally identical to an iron condor.
Free Credit Spread Screener
Stop scrolling chains looking for setups. Our credit spread screener ranks live put credit and call credit spread candidates across 5,500+ tickers by probability of profit, return on risk, IV rank, and expected move. It's the same screener we use to source our own trades.
- Filter by underlying, DTE, short-strike delta, and minimum credit
- Live institutional pricing, no 15-minute delayed quotes
- Probability of profit (POP) computed via N(d2)
- Sortable by return on capital, POP, expected return
Put Credit Spread: The Bullish Variant
The bullish version of a credit spread sells a higher-strike put and buys a lower-strike put for protection. You collect the net credit upfront and profit if the underlying stays above the short strike at expiration. Standard parameters: 30–45 DTE, 16–20 delta short strike, $5 spread width on liquid index ETFs (SPY, QQQ).
The full worked example with SPY-$440/$435 strike selection, breakeven math, Greeks profile, and four-scenario P&L is on our dedicated put credit spread guide. That page covers the bullish variant in depth; this page focuses on the credit-spread category as a whole and contrasts both directional sides.
Call Credit Spread (Bear Call Spread): Complete Example
The Setup
- Stock
- TSLA trading at $250
- Outlook
- Neutral to bearish
- IV percentile
- 82nd (very high)
- Days to expiration
- 30 days
- Sell
- 1 TSLA $260 call @ $5.50
- Buy
- 1 TSLA $270 call @ $2.80
- Net credit
- $2.70 per share
- Total credit
- $270 per spread
Risk/Reward Profile
- Max profit
- $270 (credit collected)
- Max loss
- $730 (spread width $10 - credit $2.70)
- Breakeven
- $262.70 ($260 short strike + $2.70 credit)
- ROI if win
- 37.0% ($270 profit / $730 risk)
- Probability of profit
- ~65%
Why This Trade?
- TSLA IV is in 82nd percentile - options are expensive
- Selling at resistance level ($260)
- Wide $10 spread for safety buffer
- 30 DTE for optimal Theta decay
Best Outcome: TSLA at $245 at Expiration
Stock down or flat, both calls expire worthless.
Result: Keep full $270 credit (37% return in 30 days)
How to Construct Credit Spreads: Step-by-Step
-
Determine Market Bias
Bullish = Bull put spread. Bearish = Bear call spread. Neutral = Can do both (iron condor).
Look at technical levels, trend, support/resistance to determine direction.
-
Check IV Percentile
Implied volatility affects the premium collected on credit spreads.
Use our IV guide to check IV rank/percentile.
-
Select Expiration (30-45 DTE)
30-45 days to expiration is the sweet spot for Theta decay vs time commitment.
- Too far: Theta decay too slow
- Too near: High Gamma risk, lower premiums
- 30-45 DTE: Balanced approach
-
Choose Short Strike (Sell)
Common approaches:
- 16 Delta: ~84% probability of profit (conservative)
- 30 Delta: ~70% probability of profit (balanced)
- 40 Delta: ~60% probability of profit (aggressive)
-
Choose Long Strike (Buy Protection)
Buy a strike that limits risk but doesn't eat too much premium:
- Tight spread ($2-3): Higher ROI, more risk
- Wide spread ($5-10): Lower ROI, more safety
- Target: Collect 25-35% of spread width
-
Enter as Spread Order
ALWAYS enter as a single spread order, not two separate legs. This ensures:
- Both legs fill at desired credit
- No legging risk (getting filled on one side only)
- Better pricing from market makers
Strike Selection Guide for Credit Spreads
| Delta | POP | Credit | Risk Level | Best For |
|---|---|---|---|---|
| 10-16 Delta | 84-90% | Low ($0.30-$0.80) | Very Low | Conservative, small accounts |
| 20-30 Delta | 70-80% | Medium ($0.80-$1.50) | Moderate | Most traders (sweet spot) |
| 35-40 Delta | 60-65% | High ($1.50-$2.50) | Elevated | Aggressive, high conviction |
| 45-50 Delta | 50-55% | Very High ($2.50+) | High | Not recommended for beginners |
Managing Credit Spreads
When to Close Early (Take Profit)
- Near-expiration (7 DTE or less): Elevated gamma risk makes the remaining time not worth holding
- 7 DTE or Less: Close if spread still has value - not worth the risk
- After Big Move: If stock moves sharply away from strikes, take the win
When Spread Is Tested
- Roll Out: Buy back spread, sell same strikes further out in time
- Roll Out & Up/Down: Buy back, sell further strikes with more time
- Take the Loss: If stock momentum is strong, accept the loss and move on
- Convert to Iron Condor: Sell opposite side to collect more premium
Risk Management for Credit Spreads
Critical rules
-
Never risk more than 2-5% per trade
If your max loss is $500, your account should be $10,000-25,000 minimum.
-
Use wide spreads for safety
$5-10 wide spreads give you buffer room. Tight $1-2 spreads are risky.
-
Define your exit criteria before entering
Establish profit targets and loss limits in advance and execute them consistently.
-
Avoid earnings announcements
Unless you're very experienced, close spreads before earnings.
-
Diversify across underlyings
Don't put 10 spreads on the same stock. Diversify across sectors.
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Open the options profit calculatorFrequently Asked Questions
What is a credit spread in options?
A credit spread is when you sell one option and buy another at a different strike, collecting a net credit upfront. The bought option limits your max loss. Examples include bull put spreads and bear call spreads.
What is the difference between bull put spread and bear call spread?
Bull put spread: Sell put + buy lower put (bullish, profit if stock stays up). Bear call spread: Sell call + buy higher call (bearish, profit if stock stays down). Both are credit spreads with defined risk.
How much can you make with credit spreads?
Typical returns are 10-30% of capital at risk per trade. For example, risk $350 to make $110 (31% ROI). Win rates are 60-70% with proper management.
What is the maximum loss on a credit spread?
Maximum loss = (Spread width - Premium collected) x 100. Example: $5 spread, $1.50 credit = ($5 - $1.50) x 100 = $350 max loss. Your loss is capped even if the stock goes to zero.
When should you close a credit spread?
Close at 50-75% of max profit for best risk/reward. Also close if: stock testing your short strike, <7 DTE with value remaining, or market conditions change dramatically.
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- Written by
- ApexVol Research Team
Quantitative options research. All calculations use live institutional-grade data — the same source professional volatility desks use. - Reviewed by
- Ryan Silk, ApexVol Founder
Reviewed for technical accuracy. 10+ years trading options; built ApexVol's pricing engine, Greeks model and IV-rank methodology.
Revised as market conditions and institutional data change. Last revised 2026-06-12. How we research →
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