Bull Put Spread
Bullish StrategyUse Zuviz's free options visualizer to build this strategy instantly. A credit spread that profits from bullish or neutral price movement. Sell a put and buy a lower-strike put for protection.
⚡ Key Takeaways
- Market Outlook: Neutral to moderately bullish \n
- Max Profit: Net credit received ($2.00 in example = $200/contract) \n
- Max Loss: Width of strikes - net credit ($3.00 in example) \n
- Breakeven: Short put strike - net credit (e.g., $95 - $2 = $93) \n
- Best for: Generating income when slightly bullish or neutral \n
- Greeks Impact: Positive Theta (time decay helps), negative Delta
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📊 Payoff Diagram
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🏗️ Strategy Structure
| Leg | Action | Type | Strike | Premium |
|---|---|---|---|---|
| 1 | Sell | Put | $100 (Higher) | $3.00 |
| 2 | Buy | Put | $95 (Lower) | $1.00 |
Net Credit: $3.00 - $1.00 = $2.00/share ($200/contract)
Max Loss: ($100 - $95) - $2.00 = $3.00/share ($300/contract)
🧮 Key Calculations
🎯 When to Use This Strategy
- High IV environment: More premium to collect
- Want defined risk: Know your max loss upfront
- Bullish but cautious: Limited upside expectation
- Time decay: Benefits from Theta as credit spread
📈 Greeks Impact
Delta (Δ)
Positive - You want the stock to rise.
Theta (Θ)
Negative (usually) - Time decay hurts long positions, helps short ones.
Vega (ν)
Depends - Long strategies want rising IV, short strategies want falling IV.
⚖️ Pros & Cons
Pros
- Defined risk
- Profits from time decay
- Income strategy
Cons
- Capped profit
- Assignment risk
- Gamma risk near expiration
📝 Real-World Example
Stock: NVDA at $500. Trade: Sell $480 Put, Buy $470 Put.
Credit: $2.00. Max Profit: $200. Max Loss: $800. Breakeven: $478.