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Bull Put (credit)

Spreads2 legscreditbullish to neutral

Sell a put and buy a further-out one beneath it. Same directional idea as a cash-secured put, for a fraction of the collateral — and with the loss capped instead of the shares.

What it is

You sell the put you actually want and buy a cheaper one below it. The long put is insurance: it defines exactly how bad the downside can get.

The credit is smaller than the naked put's, because you paid for that protection. What you get back is capital efficiency — the broker holds the width of the spread rather than the full strike.

On our example the cash-secured put ties up $4,500. The same directional view as a $5-wide spread ties up $500. That is a nine-fold difference in capital for a similar-shaped bet.

How it is built

Priced off the guide's shared chain, on a $50 stock. Every figure beneath the diagram is computed from these legs by the same engine the Strategy Builder uses.

ActionWhatStrikeQtyPrice
Sellput$451$1.50
Buyput$401$0.60
$0$40$45now $50$44.10stock price at expiryprofit / loss
Max profit
$90
Max loss
−$410
Break-even
$44.10
Net credit
$90

Collateral held: $500 — the gross amount tied up, before the premium received.

A $45 put sold for $1.50 against a $40 put bought for $0.60 — a $5-wide spread for a $0.90 net credit. Both ends are flat: the gain caps at the credit above $45, the loss caps at the width less the credit below $40. Collateral is the width, not the short strike, which is the entire reason this structure exists.

Reading the shape

Flat and profitable above the short strike: the credit is the whole gain.

Flat and losing below the long strike: the maximum loss is the width minus the credit, and it cannot get worse no matter how far the stock falls.

Between the strikes the line slopes, and the single break-even sits at the short strike less the credit.

How it is used

The conditions are the same ones that suit a cash-secured put — elevated implied volatility, a strike below a level that has held. What differs is that assignment is not the plan: this structure is built to expire, not to take delivery.

Width is the risk dial. A narrow spread costs less collateral and pays less; a wide one approaches the naked put in both. Choosing width is choosing how much of the tail you are keeping.

Return on risk is the honest measure: credit divided by the collateral held. $0.90 on $500 held is 18% for the period — a very different figure from the same credit against $4,500, and why capital at risk has to be computed from the structure rather than the short strike.

Assignment odds for a spread are the short leg's, not the net of both. It is the short strike that gets exercised; netting the two would describe the position as far safer than it is.
Booking a spread as a cash-secured put makes every return figure wrong by the ratio of the strike to the width — for a $45/$40 pair, nine times. Nothing in a P&L display looks broken when this happens.
Both legs need to be closed or expire. A spread whose long leg is sold off separately is a naked short put with the collateral of a spread, which is not the position anyone intended.

Like everything in this guide, these are descriptions of structures and conditions — context for your own decisions, not instructions to trade.

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