I’ve been trading options for more than 30 years, and if there’s one thing I’ve learned, it’s this: trades have to balance risk and reward. That’s why the bull put spread has been one of my go-to strategies for decades.
If you’re new to options, this strategy might sound intimidating at first, but it isn’t. In fact, it’s one of the most beginner-friendly ways to generate steady income while keeping your risk defined and manageable.
What Is a Bull Put Spread?
Here’s the basic idea: with a bull put spread, you’re selling one put option and buying another put option at a lower strike price. This creates a “spread” that pays you upfront (a credit) and caps your potential loss.
Think of it like running a small, controlled business: you take in revenue, you know your worst-case cost, and you aim for consistent profits.
Watch: Bull Put Spread 101 – Setup, Profit Zones & Risks
Why I Like This Strategy
Unlike risky naked options trades, the bull put spread protects your downside. It’s designed for markets that are neutral to slightly bullish, making it perfect for traders who don’t want to gamble on big price moves but still want to collect reliable income.
What You’ll Learn in This Guide
In this guide, I’ll break down exactly:
- How the strategy works (step by step)
- When to use it for the best results
- How to set it up—without confusing jargon
Whether you’re just starting out or looking to add safer trades to your playbook, by the end, you’ll know exactly how to make the bull put spread work for you.
How a Bull Put Spread Works
At its core, a bull put spread is a credit spread. That means you receive money upfront when you open the trade. It involves two key steps:
- Sell a put option at a strike price closer to the current stock or index price.
- Buy a put option at a lower strike price to limit your downside risk.
Both options have the same expiration date. This creates a “spread” between the two strike prices—hence the name.
Real Example (From My Monthly Trend Service)
Let’s say the S&P 500 (SPX) is trading at 5,500. In our Monthly Trend Service, we might open a bull put spread like this:
- Sell the 5,550 put
- Buy the 5,540 put
This is a $10-wide spread. Suppose we collect a net credit of $5.00 (or $500 per contract). This credit is our maximum profit.
Risk, Reward & Stop Loss
The maximum loss is the spread width minus the credit received:
($10 – $5) = $5.00 (or $500 per contract).
To control risk, we also set a stop loss at $7.50. If the spread value increases to $7.50, we exit the trade to prevent a full loss. This approach keeps our realistic risk closer to $250 instead of the full $500.
When Does It Work Best?
This strategy works best when:
- The market is neutral to slightly bullish.
- You want to generate consistent income with defined risk.
- You prefer high-probability trades with a clear exit plan.
Quick Answer for Beginners
Q: What is the payout of a bull put spread?
A bull put spread pays you a fixed credit upfront. In this example, you can make up to $5 per contract, while your loss is capped at $5 per contract. With a stop loss at $7.50, the practical risk is reduced to about $2.50 per contract.
Bull Put Spread vs. Other Strategies
One of the best ways to understand a bull put spread is to compare it to other common option strategies. This helps you see when to use each one and why the bull put spread is often the safer play for generating income.
Bull Put Spread vs. Bull Call Spread
Bull put spreads and bull call spreads are both bullish strategies, but they work differently:
- Bull put spread: You collect a credit upfront. It works best when the market stays above your short put strike.
- Bull call spread: You pay a debit upfront. It works best when the market rises strongly above your long call strike.
Quick Answer:
Q: Which is better, a bull call spread or a bull put spread?
A bull put spread is generally better if you want higher probability income with defined risk. A bull call spread is better if you expect a big price move upward and are willing to risk a debit.
Bull Put Spread vs. Bear Put Spread
These two strategies are complete opposites:
- Bull put spread: Profits when the underlying price stays above the short put strike.
- Bear put spread: Profits when the underlying price drops below the long put strike.
Quick Answer:
Q: What’s the difference between a bull put spread and a bear put spread?
A bull put spread is a credit strategy for bullish markets. A bear put spread is a debit strategy for bearish markets.
Bull Put Spread vs. Covered Call
If you’ve heard of covered calls, the bull put spread has a similar risk profile but doesn’t require owning the stock.
- Bull put spread: Lower capital requirement, defined risk, and no stock ownership.
- Covered call: Requires owning the stock and accepting downside exposure.
Quick Answer:
Q: Is a bull put spread like a covered call?
Yes — both generate income with limited upside, but a bull put spread requires much less capital and doesn’t require buying the stock.
When to Use a Bull Put Spread
Timing is everything in trading. The bull put spread shines in specific conditions, and knowing when to deploy it can make the difference between consistent profits and frustration.
Best Market Conditions
You’ll want to use a bull put spread when:
- The market is neutral to slightly bullish.
- Implied volatility is elevated, allowing you to collect higher premiums.
- You expect the underlying price to stay above your short put strike until expiration.
Why It Works in These Conditions
Because you’re collecting a credit upfront, you don’t need a huge rally to make money — the underlying just needs to stay above your short strike. This makes the bull put spread ideal for choppy or sideways markets where you expect limited downside movement.
Checklist Before Entering a Bull Put Spread
- Is the underlying in an uptrend or trading sideways?
- Is there enough premium to make the trade worth it? (Aim for at least 30–50% return on risk.)
- Is implied volatility high enough to justify the credit received?
- Do you have a stop loss plan if the trade moves against you?
Quick Answer for Beginners
Q: When is the best time to use a bull put spread?
The bull put spread works best when you’re moderately bullish on a stock or index and want to collect income as long as the price stays above your short put strike.
Setting Up a Bull Put Spread (Step-by-Step)
Placing a bull put spread is easier than you think. Here’s the step-by-step process I use in my Monthly Trend Service — the same one I’ve used for decades on Wall Street.
Step 1: Choose Your Underlying
I focus on liquid, institutionally traded instruments like the S&P 500 (SPX) or SPY ETF. These have tight bid-ask spreads and plenty of options activity, which helps you get fair pricing.
Step 2: Pick Your Expiration
For Monthly Trend trades, I usually target 30–45 days until expiration. This provides enough time to collect premium while benefiting from time decay (theta).
Step 3: Select Your Strikes
Choose a short put strike that’s comfortably below the current price, typically where there’s a strong support level. Then, select a long put strike $10 lower to define your risk. This creates a $10-wide spread.
Step 4: Enter for a Credit
Look for a net credit of around $5.00 on a $10-wide spread. That means you’re risking $5 to make $5, but with a high probability of success when properly placed.
Step 5: Set a Stop Loss
I use a stop loss at $7.50. If the spread price rises to this level, I exit the trade to avoid taking the full loss. This simple rule keeps my practical risk closer to $2.50 per spread.
Step 6: Monitor & Manage
Check your position daily. If the market moves in your favor and the spread value drops significantly, you can close the trade early and lock in profits.
Popular Platforms for Placing Bull Put Spreads
- Interactive Brokers (IBKR): Advanced tools, low commissions.
- Thinkorswim (TD Ameritrade): Great for charting and analysis.
- Robinhood: Beginner-friendly, commission-free trading.
Quick Answer for Beginners
Q: How do you set up a bull put spread?
To set up a bull put spread, sell a put at a strike below the current price and buy another put at a lower strike with the same expiration. Aim for a net credit (e.g., $5 on a $10-wide spread) and use a stop loss to limit risk.
Calculating Profit, Loss & Breakeven
One of the best parts about a bull put spread is that your risk and reward are clearly defined before you even place the trade. Let’s break it down using our Monthly Trend–style example.
Maximum Profit
The maximum profit is the credit you received when opening the trade. In our example:
Max profit = $5.00 per spread ($500 per contract).
You earn this if the S&P 500 stays above your short put strike of 5,550 at expiration.
Maximum Loss
The maximum loss is the spread width minus the credit received:
($10 – $5) = $5.00 per spread ($500 per contract).
But with a stop loss at $7.50, we aim to cap our practical risk at around $2.50 per spread ($250 per contract).
Breakeven Point
Your breakeven is the short put strike minus the credit received:
5,550 – $5.00 = 5,545.
If the S&P 500 stays above 5,545, you end the trade with a profit.
Payoff Table Example
| SPX at Expiration | Profit/Loss per Spread |
|---|---|
| Above 5,550 | +$500 (Max Profit) |
| 5,545 | $0 (Breakeven) |
| Below 5,540 | – $500 (Max Loss) |
Quick Answer for Beginners
Q: How do you calculate profit and loss on a bull put spread?
Your max profit is the credit received. Your max loss is the spread width minus that credit. The breakeven is the short strike minus the credit received.
Payoff Diagrams & Visual Examples
Seeing the numbers in action makes it much easier to understand a bull put spread. Here’s what our example trade looks like at expiration.
Trade Setup Recap
- Sell the 5,550 put
- Buy the 5,540 put
- Net credit received: $5.00 ($500 per contract)
- Max profit: $500 per contract
- Max loss: $500 per contract (reduced to ~$250 with our $7.50 stop)
- Breakeven: 5,545
How to Read the Payoff Diagram
The diagram below shows your profit or loss at expiration:
- Flat line above 5,550: Your max profit ($500).
- Sloping line between 5,550 and 5,540: Gradual loss as the index drops.
- Flat line below 5,540: Your max loss ($500).
This “hockey stick” shape is typical of credit spreads: limited profit, limited loss, and high probability of success.
Visual Example
Here’s what the payoff diagram for this trade would look like:
Quick Answer for Beginners
Q: What does a bull put spread payoff look like?
It looks like a flat line at your max profit above the short put strike, sloping down to your max loss below the long put strike. Profit is limited, but so is risk.
Risks & Disadvantages of a Bull Put Spread
While the bull put spread offers defined risk, it isn’t a no-risk strategy. Like any options trade, it comes with downsides you should understand before placing a trade.
1. Limited Profit Potential
You can only make the credit received when opening the trade. In our example, that’s $5.00 per spread ($500 per contract). Even if the market rallies far above your short strike, your profit is capped.
2. Risk of a Sharp Market Drop
If the underlying price falls below your long strike (5,540 in our example), you’ll hit your maximum loss of $500 per spread. While we use a $7.50 stop to limit practical losses, fast-moving markets can sometimes skip over stop orders.
3. Assignment Risk
If your short put finishes in the money, you could be assigned and forced to buy shares at the strike price. While this is rare when managed properly, it’s still a possibility you should be prepared for.
4. Requires Active Monitoring
Even though it’s a high-probability trade, you can’t just “set it and forget it.” You’ll need to monitor price movements and exit early if the trade moves against you.
Quick Answer for Beginners
Q: What are the risks of a bull put spread?
The main risks are limited profit, potential for loss if the price drops below your long strike, assignment risk, and the need for active monitoring.
Exit & Adjustment Strategies
One of the biggest mistakes I see beginners make is holding a bull put spread until expiration no matter what. That’s not how professionals trade. Let me walk you through the ways I manage these trades inside my Monthly Trend Service.
1. Taking Profits Early
You don’t need to wait for expiration to lock in gains. If the spread value drops to 70–80% of the original credit, I often close the trade early. This avoids the risk of sudden market reversals.
2. Using a Stop Loss
We’ve already discussed setting a $7.50 stop loss on our $10-wide spread. This prevents small losses from turning into full losses. It’s one of the most important rules for keeping risk manageable.
3. Rolling the Spread
If a trade is moving against you but hasn’t breached your long strike, you can roll the position — close the current spread and reopen a new one at a later expiration or different strike prices. This often reduces risk and gives the trade more time to work.
4. Letting Winners Expire
If the market stays well above your short strike (like 5,550 in our example), you can simply let the spread expire worthless and keep the full credit. This is the ideal outcome for a bull put spread.
Quick Answer for Beginners
Q: When should you close a bull put spread?
Close a bull put spread when you’ve captured most of the profit (e.g., 70–80% of the credit), if it hits your stop loss, or if you need to roll the position to reduce risk or extend time.
Advanced Bull Put Spread Variations
Once you’ve mastered the basic bull put spread, you can expand your playbook with some advanced variations. These are strategies I’ve used on the trading desk and also teach in my Monthly Trend Service.
1. Laddering Spreads
Instead of opening one spread at a single strike, you can ladder multiple spreads at different strike prices. This diversifies your risk and gives you more chances to collect credit if the market moves around.
2. Turning It Into an Iron Condor
A bull put spread can easily become part of an iron condor by adding a bear call spread on the opposite side. This allows you to collect more premium while keeping risk defined — perfect for range-bound markets.
3. Calendar Spread Variation
Some traders use a bull put calendar spread, where the short put has a closer expiration date than the long put. This lets you take advantage of time decay differences between the two options.
4. Adjusting Strike Widths
In our Monthly Trend trades, we use $10-wide spreads, but advanced traders may adjust the width based on their risk appetite. Narrower spreads (like $5) reduce total risk, while wider spreads ($20 or more) offer higher credits but require more margin.
Quick Answer for Beginners
Q: Can you combine a bull put spread with other strategies?
Yes — many traders ladder multiple spreads, turn them into iron condors, or use calendar spread variations to adapt to different market conditions.
Bull Put Spread FAQs
Q: Is a bull put spread a credit strategy?
Yes. A bull put spread is a credit spread because you receive a net credit upfront when you sell the higher strike put and buy the lower strike put.
Q: Which is better, a bull call spread or a bull put spread?
If you want higher probability income with defined risk, a bull put spread is often better. A bull call spread is for traders expecting a big price increase and willing to pay a debit for that chance.
Q: What happens if the stock falls below the long put?
If the price drops below your long put (5,540 in our example), you’ll reach the maximum loss. In our approach, we mitigate this by using a $7.50 stop loss to exit before a full loss occurs.
Q: What is the maximum loss on a bull put spread?
Your maximum loss is the spread width minus the credit received. For a $10-wide spread with a $5 credit, the max loss is $5 (or $500 per contract).
Q: Can I let a bull put spread expire?
Yes. If the price stays above your short put strike at expiration, the options expire worthless, and you keep the entire credit. Many traders choose to close early and lock in most of the profit to reduce risk.
Q: Is a bull put spread good for beginners?
Absolutely. It’s one of the best defined-risk strategies for collecting income with a high probability of success, especially when paired with stop losses and proper position sizing.
Tools & Platforms for Trading Bull Put Spreads
Having the right tools can make trading bull put spreads much easier — and safer. Here are my go-to platforms and resources for executing these trades effectively.
1. Broker Platforms
- Interactive Brokers (IBKR): My top choice for professionals. Offers advanced order types, low commissions, and excellent risk management tools.
- Thinkorswim (TD Ameritrade): Perfect for charting, analyzing volatility, and testing spread strategies before you execute.
- Robinhood: Simple and beginner-friendly. Ideal for traders who want to start small without paying commissions.
2. Options Analysis Tools
- Options Profit Calculators: Use these to model payoff diagrams and breakeven points before placing trades.
- Volatility Tools: Platforms like Thinkorswim or OptionStrat help you evaluate implied volatility and premium pricing.
3. Automation & Signal Services
If you don’t want to do all the analysis yourself, you can follow proven trade signals like we provide in my Monthly Trend Service. We deliver pre-vetted, high-probability bull put spreads so you can trade like a professional without the steep learning curve.
Quick Answer for Beginners
Q: What platform is best for trading bull put spreads?
Interactive Brokers and Thinkorswim are excellent for advanced features. Robinhood works well for beginners. For hands-off trading, consider following a signal service like Monthly Trend.
Conclusion: Make the Bull Put Spread Work for You
The bull put spread is one of my favorite strategies for a reason: it offers defined risk, steady income potential, and a high probability of success when used correctly. Whether you’re trading the S&P 500 or individual stocks, this approach lets you collect premium without exposing yourself to unlimited losses.
In this guide, we’ve covered:
- Exactly how the bull put spread works
- When to use it and how to manage risk
- Advanced variations and platforms to trade it
Now, here’s the truth: knowing the strategy is one thing. Executing it with discipline, timing, and risk management is another. That’s why I created the Monthly Trend Service — to give traders like you institutional-grade bull put spread signals without the guesswork.
Ready to Trade Like a Pro?
Join my Monthly Trend Service and start receiving pre-vetted, high-probability SPX bull put spreads every month. Stop guessing, start trading with a plan.
After 30+ years on Wall Street, I can tell you this: success in trading doesn’t come from chasing “hot tips” — it comes from consistent, disciplined execution. Let me help you trade like a professional.
