Bull Put Spread
A defined-risk bullish credit strategy — sell a put spread to collect premium.
The bull put spread (credit put spread) involves selling a higher-strike put and buying a lower-strike put for protection, collecting a net credit. It profits when the underlying stays above the short put strike through expiry. It is a high-probability, defined-risk way to express a bullish-to-neutral view and earn income from theta.
Strategy Structure
Sell 1 higher-strike Put + Buy 1 lower-strike Put (same expiry) for a net credit.
Profit & Loss Profile
Market Outlook
Bullish to neutral — expecting the underlying to stay above the short put strike.
When to Use
- You expect the market to hold above support
- You want a defined-risk alternative to selling a naked put
- IV is elevated and you want to sell premium with capped risk
- You prefer high-probability income trades
When to Avoid
- Before bearish catalysts or in a fragile market
- When IV is very low (credit too small relative to risk)
- In clearly downtrending markets
- If the support level is weak or untested
Ideal Conditions
- Bullish-to-neutral view with strong support below the short strike
- Elevated IV for richer credit
- Weekly expiry for fast theta decay
- No bearish catalysts during the holding period
Greeks Impact
Positive delta — profits as the underlying rises or holds. Delta grows negative against you if the short strike is breached.
Negative gamma — losses accelerate as the underlying falls toward the short strike near expiry.
Positive theta — time decay benefits the position, maximized when above the short strike.
Negative vega — benefits from IV contraction; the short put carries more vega than the long put.
Nifty Example
Setup: Sell 24300 PE at ₹70, Buy 24100 PE at ₹35. Net credit = ₹35. Lot size = 75. Max profit = ₹35 × 75 = ₹2,625. Max loss = (200 - 35) × 75 = ₹12,375. Breakeven = 24265.
If profitable: If Nifty expires at or above 24300, both puts expire worthless and you keep the full ₹2,625 credit.
If loss: If Nifty falls to 24050 or below, the spread reaches max loss of ₹12,375 per lot.
Adjustments & Risk Management
- Roll the spread down and out if the underlying approaches the short strike
- Close at 50% of max profit to lock in gains and cut risk
- Convert to an iron condor by adding a bear call spread if the market turns range-bound
- Cut losses if the underlying breaks decisively below support
Bull Put Spread vs Naked Short Put
Both are bullish-to-neutral income trades, but the bull put spread buys a protective lower put that caps the maximum loss and slashes the margin requirement. A naked Nifty put can block over ₹1,00,000 in margin, whereas the spread typically blocks only the spread width minus credit — often under ₹15,000 per lot.
The trade-off is reduced credit: the protective put costs some premium, so you collect less. For most retail traders, the dramatically lower margin and defined risk make the spread the superior choice, especially given the gap-down risk in Indian indices.
Strike Selection and Probability
Place the short put below a strong support level and beyond the expected move. If the ATM straddle implies a ±250 point move on Nifty, selling a put 250-300 points OTM gives roughly a 70-75% probability of expiring worthless.
The width between strikes sets your risk-reward. A narrow 100-point spread limits loss but collects less credit; a 200-point spread collects more but risks more. Match the width to your conviction and the support structure on the chart.
Related Strategies
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