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What Is a Bull Put Spread?
A bull put spread is a two-leg options strategy where you sell a put at a higher strike price and buy a put at a lower strike price, both with the same expiry. You collect a net credit upfront, and the trade profits if the stock or index stays above your short strike at expiry. It’s the credit-side counterpart to a bull call spread — you get paid to enter, instead of paying a premium.
It’s also called a credit put spread. Traders reach for it when they’re moderately bullish and want to collect premium rather than pay for it.
How a Bull Put Spread Is Constructed
The Two Legs
- Sell a put option at a higher strike price — you receive premium for this
- Buy a put option at a lower strike price — you pay a smaller premium for this, which limits your downside
The premium you receive from the short put is always higher than what you pay for the long put, since it’s closer to the money. That difference is your net credit.
Rules to Keep the Spread Valid
- Same underlying (e.g., Nifty, Bank Nifty, or a stock)
- Same expiry date for both legs
- Same lot size for both legs
- Strike prices set based on how much premium you want to collect versus how much risk you’re willing to define
Bull Put Spread Example With Nifty Options
Trade Setup
Say Nifty is trading at 24,800. You’re moderately bullish and expect it to hold above 24,600 through expiry.
- Sell the 24,700 put for ₹90
- Buy the 24,600 put for ₹55
- Net credit received: ₹35 per share (₹90 − ₹55)
At Nifty’s current lot size, this credit is collected upfront and is yours to keep if Nifty closes above 24,700 at expiry.
Payoff Table at Different Expiry Levels
| Nifty at Expiry | Short Put (24,700) | Long Put (24,600) | Net P&L |
|---|---|---|---|
| 24,900 | Expires worthless | Expires worthless | +₹35 (max profit) |
| 24,700 | Expires worthless | Expires worthless | +₹35 (max profit) |
| 24,665 | ITM by ₹35 | Expires worthless | ₹0 (breakeven) |
| 24,500 | ITM by ₹200 | ITM by ₹100 | −₹65 (max loss) |
Between 24,700 and 24,600, your loss grows point for point. Below 24,600, both legs are in the money and your loss is capped at the spread width minus the credit received.
Max Profit, Max Loss & Breakeven Formulas
Max Profit = Net Credit Received In the example: ₹35 per share. You keep the full credit if the underlying closes at or above the higher (short) strike.
Max Loss = Spread Width − Net Credit Spread width is 24,700 − 24,600 = ₹100. Max loss = ₹100 − ₹35 = ₹65 per share, capped regardless of how far the price falls.
Breakeven = Higher Strike − Net Credit 24,700 − 35 = 24,665. Below this level at expiry, the trade starts losing money.
When Should You Use a Bull Put Spread?
High IV / Elevated Put Premiums
Bull put spreads work best when implied volatility is high, since you’re selling premium at inflated prices. The richer the premium on your short put, the more credit you collect for the same risk.
Moderately Bullish, Not Aggressive
This isn’t the strategy for a stock you expect to rally hard. It profits from the underlying simply staying above a level — not from a big directional move. If you expect an explosive rally, a long call or bull call spread captures more upside.
Preferring to Collect Premium Over Paying It
Some traders structurally prefer credit strategies because time decay (theta) works in their favor from day one, unlike a debit spread where you need the move to happen before decay eats into your position.
Key Risks & Exit Discipline
Early Assignment Risk on the Short Put
In India, index options are cash-settled, so this risk doesn’t apply to Nifty or Bank Nifty spreads. But for stock options, which are physically settled, a deep in-the-money short put can be assigned before expiry, forcing you to buy shares at the strike price and tying up capital you didn’t plan to deploy. Check whether your underlying is an index or a stock before assuming this doesn’t apply to you.
Capped Upside Despite Margin Blocked
Even though this is a credit strategy, your broker still blocks margin equal to the spread width (minus credit received) for the life of the trade. Your maximum gain is fixed at the credit collected — you can’t earn more even if the underlying rallies sharply past your short strike.
When to Book Profit or Cut the Trade
A common rule: close the position once you’ve captured 50–75% of the maximum credit. Chasing the last few rupees near expiry rarely justifies the added gamma risk. Separately, if you’re within 7–10 days of expiry and the underlying is trading close to or below your short strike, cutting the position early is usually smarter than hoping for a recovery.
Bull Put Spread vs Bull Call Spread
Both are bullish, defined-risk strategies, but they differ in cash flow: a bull call spread costs you a net debit, while a bull put spread pays you a net credit upfront. Which one fits better usually comes down to implied volatility — credit spreads make more sense when IV is elevated.
For the full side-by-side comparison, exit strategy nuances, and which one suits which market condition, see our Bull Call Spread Strategy guide →
How We Use Bull Put Spreads at JamaDhan
In our Options Trading workshops in Jaipur, one pattern shows up repeatedly: traders who start with naked put writing eventually move to bull put spreads once they’ve had one bad expiry wipe out weeks of premium income. Capping the downside with the long put costs a small amount of credit, but it turns an open-ended risk into a known number before the trade is even placed — which is the difference between a strategy you can size consistently and one you’re gambling with.
This is covered as part of our Options Trading course, alongside option chain reading and strike selection. (Separately, our Dhan-partnered events cover algo trading and SLBM as exposure sessions — we don’t teach algo trading as part of the core curriculum.)