Bull Put Spread Strategy: Generate Bullish Income with Defined Risk

Learn how to profit from bullish market moves with limited risk. Master the bull put spread: setup, strike selection, management tactics, and when to deploy this popular income-generating credit spread.

Bullish Strategy

70-75% Win Rate

Beginner-Intermediate

TL;DR - Quick Summary

Bull Put Spread = Sell OTM put + Buy further OTM put = Collect credit. You profit if stock stays above your short put strike. Bullish bias required. Best in high IV (rank >50). Defined risk - max loss is capped. Target 15-30% ROI per trade with 70%+ win rate. Close at 50% profit to optimize returns. Great alternative to buying stock or calls - lower cost, defined risk, positive Theta.

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What is a Bull Put Spread?

A bull put spread is a bullish credit spread that profits when a stock stays above a certain price. You sell a put option (collecting premium) and buy a lower-strike put option (for protection), creating a vertical spread with defined risk and limited profit.

It's called "bull" because you want the stock to go up (or stay flat), and "put spread" because you're trading puts. The "credit" means you receive money upfront - this is your maximum profit. Your risk is limited by the long put you buy.

The Structure

Step 1: Sell Put (Higher Strike)

Sell an OTM put to collect premium

Example: Sell $95 put for $2.00

Step 2: Buy Put (Lower Strike)

Buy a further OTM put for protection

Example: Buy $90 put for $0.80

Net Credit: $1.20 per share ($120 per spread)

This is your maximum profit

Risk/Reward Profile

Max Profit: Credit collected ($120)

Max Loss: Spread width - Credit ($5 - $1.20 = $380)

Breakeven: Short put - Credit ($95 - $1.20 = $93.80)

Profit If: Stock stays above $95 at expiration

ROI: $120 profit / $380 risk = 31.6%

Why Trade Bull Put Spreads?

✓ Cheaper than buying stock: Less capital required, still profit from bullish moves
✓ Defined risk: Know your max loss before entering (unlike naked puts)
✓ Time decay works for you: Positive Theta - earn money daily as options decay
✓ High probability: 70-75% win rate with proper strike selection
✓ Flexibility: Don't need stock to rally - just stay above strike

Real Example: Bull Put Spread on AAPL

The Setup

Stock: AAPL trading at $185

Outlook: Bullish - expect $185+ in 30 days

Support Level: Strong support at $175

IV Rank: 62 (favorable for selling)

Days to Expiration: 35 DTE

Strategy: Bull Put Spread

Spread Width: $5

The Trade

Sell: 1 AAPL $180 put @ $2.80

Buy: 1 AAPL $175 put @ $1.50

Net Credit: $1.30 per share = $130 total

Max Profit Scenario

If AAPL ≥ $180 at expiration:

Both puts expire worthless

You keep the full credit collected

Profit: $130 (28.9% ROI)

Risk Analysis

Max Loss: $370

Breakeven: $178.70

% Below Current: 3.4%

Buffer: $6.30 to short strike

POP: ~73%

Outcome 1: AAPL at $188 (Stock Rises)

Stock rallied $3. Both puts expire worthless.

Result: Keep full $130 credit (28.9% return in 35 days)

Outcome 2: AAPL at $181 (Small Move)

Stock stayed relatively flat. Short put expires OTM.

Result: Keep full $130 credit (28.9% return)

Outcome 3: AAPL at $179 (Through Short Strike)

Stock dropped slightly below short strike. $180 put worth $1, $175 put worthless.

Result: -$100 + $130 credit = $30 profit (still winning!)

Outcome 4: AAPL at $170 (Large Drop)

Stock crashed. $180 put worth $10, $175 put worth $5. Max loss scenario.

Result: -$500 + $130 credit = -$370 loss (loss is capped)

How to Construct a Bull Put Spread: Step-by-Step

Confirm Bullish Outlook

Ensure you're moderately bullish on the stock. Look for:

• Uptrend or consolidation above support
• Positive technical indicators
• Support levels below current price
• Bullish fundamental or technical setup

Check IV Rank/Percentile

Bull put spreads work best when IV is elevated (rank >50). Higher IV = higher premiums = better ROI.

Use our IV guide to check current levels

Select Expiration (30-45 DTE)

30-45 days to expiration balances Theta decay with enough time for your thesis to play out.

Choose Short Put Strike

Select based on your risk tolerance and desired probability:

• 16 Delta: 84% POP (conservative, lower premium)
• 25 Delta: 75% POP (balanced - recommended)
• 30-35 Delta: 65-70% POP (aggressive, higher premium)

Determine Spread Width

Most traders use $5-10 wide spreads:

• $5 wide: Higher ROI, less buffer
• $10 wide: More safety, lower ROI
• Target: Collect 25-35% of spread width

Enter as Spread Order

Always enter as a single spread order, not two separate legs. This ensures proper fill and pricing.

Bull Put Spread Strike Selection

Approach	Delta	Distance Below	POP	Premium	Best For
Conservative	10-16	10-15%	84-90%	Low	Beginners, capital preservation
Balanced	20-25	5-8%	75-80%	Medium	Most traders (recommended)
Aggressive	30-35	2-5%	65-70%	High	High risk tolerance, strong conviction

Recommended Approach

Most profitable long-term: 25 Delta short puts, $5-10 wide spreads. This gives you 75% win rate with solid premium. Close at 50% profit to boost win rate to 80%+ and increase overall annual returns. On a $100 stock, sell the $95 put (25 Delta) and buy the $90 put.

Managing Bull Put Spreads

Profit-Taking Strategy

✓ Close at 50% profit: Optimal risk/reward. Capture 50% in 40-50% of time
✓ Close at 75% profit: More aggressive approach for experienced traders
✓ Close at 7 DTE: If not at profit target, close to avoid Gamma risk
✓ Let expire worthless: Only if comfortably OTM with <3 DTE

When Stock Drops

1. Stock approaches short strike (>14 DTE): Let it work, don't panic
2. Stock breaches short strike: Consider rolling down and out for credit
3. Losing 2x credit: Exit position, accept the loss
4. Near expiration & ITM: Close to avoid assignment

Rolling Strategy

When your spread is challenged, you can "roll" to extend time and collect more credit:

Roll Down and Out

Buy back current spread, sell lower strikes further out in time

Best when: Stock drops but you're still bullish medium-term

Roll Out Same Strikes

Buy back current spread, sell same strikes 21-30 days further out

Best when: Stock is near short strike but you expect reversal

When NOT to Roll

Don't roll if: Stock broken below key support, cost is debit (no credit), or you've lost conviction

When to Trade Bull Put Spreads

Ideal Conditions

✓ Bullish bias: You expect stock to stay flat or rise
✓ High IV: IV rank >50, ideally >70 for better premiums
✓ After pullbacks: Stock pulled back to support in uptrend
✓ At support levels: Clear technical support below current price
✓ Bullish catalysts ahead: Positive events on horizon

When to Avoid

✗ Downtrend: Stock in persistent downtrend - don't fight the trend
✗ Low IV: IV rank <30 - premiums too small
✗ Bearish catalysts: Negative earnings, bad news pending
✗ Broken support: Stock broke below key support level
✗ Uncertain outlook: You're not actually bullish - don't force the trade

Greeks Analysis for Bull Put Spreads

Delta (Directional Risk)

Positive Delta (+15 to +35) - You profit when stock rises, lose when it falls.

Example: Delta of +20 means for every $1 the stock rises, your spread gains ~$20 in value. This is why you want to be bullish before entering.

Theta (Time Decay)

Positive Theta (+$8 to +$15/day) - Time decay works in your favor.

Every day that passes, the spread loses extrinsic value. Since you sold more premium than you bought, this benefits you. Theta accelerates in the final 30 days.

Vega (IV Sensitivity)

Negative Vega (-10 to -20) - You profit when IV drops.

Since you sold options, falling IV helps you. This is why selling during high IV is ideal - you collect fat premiums that shrink as IV normalizes. Check our IV guide.

Gamma (Delta Acceleration)

Negative Gamma - Risk increases as stock approaches short strike.

Gamma is low when spread is OTM but increases dramatically near expiration if stock approaches your short put. This is why closing early reduces risk.

Bull Put Spread vs Other Bullish Strategies

Strategy	Cost	Max Profit	Max Loss	Theta	Best When
Bull Put Spread	Collect credit	Limited (credit)	Defined	Positive	Moderate bullish, high IV
Long Call	Pay debit	Unlimited	Premium paid	Negative	Very bullish, low IV
Long Stock	High	Unlimited	Stock to $0	None	Very bullish, long-term
Bull Call Spread	Pay debit	Limited	Debit paid	Negative	Very bullish, low IV

Calculate Your Bull Put Spreads

Use our free calculator to see profit zones, breakeven, max profit/loss, and all Greeks for any bull put spread.

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Frequently Asked Questions

What is a bull put spread?

A bull put spread is a bullish credit spread where you sell a put and buy a lower put for protection. You collect credit upfront and profit if the stock stays above your short put strike. It offers defined risk, limited profit, and positive time decay.

How much money can you make with bull put spreads?

Typical returns are 15-30% of capital at risk per trade. With 70-75% win rate and proper management, monthly returns of 6-10% on deployed capital are realistic. A $10,000 account can generate $600-1,000 per month.

What is the maximum loss on a bull put spread?

Maximum loss = (Spread width - Premium collected) × 100. Example: $5 spread, $1.50 credit = $350 max loss. Your loss is capped at this amount even if the stock crashes to zero.

When should you trade bull put spreads?

Best when you're moderately bullish, IV is elevated (rank >50), stock is at support or in uptrend, and after pullbacks in bull markets. Avoid when stock is in downtrend or IV is very low.

How do you manage a bull put spread?

Close at 50% of max profit for optimal returns. If stock approaches short strike, consider rolling down and out. Exit if losing 2x the credit collected. Don't hold to expiration if spread is challenged.