Quick Answer
A put bull spread is a bullish vertical: sell the higher-strike put and buy the lower-strike put at the same expiration for a net credit. It profits as the futures rises and the gap between the two put values narrows toward zero. Maximum profit is the credit received; maximum loss is the strike difference minus the credit.
The put bull spread reaches the same bullish view as the call bull spread, but through credit mechanics instead of debit. You collect premium up front and profit if the futures holds up. This is the put-side "collect premium" bullish play.
The Bullish, Collect-Premium Position
A put bull spread (also called a bull put spread or a credit put spread) is a bullish vertical built from two puts and entered for a net credit.
- Recall that a put is the right to go short the future at the strike. Writing a put is therefore a bullish act: you are betting the market will not fall to that strike.
- You sell the more valuable higher-strike put and buy the less valuable lower-strike put, so premium comes in on net. The bought lower-strike put caps the loss if the market drops anyway.
Think of it this way: you are being paid to promise you would buy the future at the higher strike. As long as the market stays up, that promise never gets called on, and you keep the premium.
Build: Sell the Higher Strike, Buy the Lower Strike
- Sell (write) the put at the higher strike; buy the put at the lower strike, same expiration, same underlying futures.
- The higher-strike put you sell brings in more premium than the lower-strike put you buy costs, so you receive cash on net. The position is a net credit (premium received), and that credit is the maximum profit.
Direction: Profits as the Futures Rises and the Spread Narrows
NFA annotates this spread "spread to narrow." The cause-and-effect chain:
- Futures price rises, or holds above the higher strike while time decays → both puts lose value → the gap between the two put values narrows toward zero → the writer keeps the credit.
- The best case is both puts expiring worthless: the gap has collapsed to zero and the full credit is kept.
Exam Tip: Gotchas
- Narrow, not widen. Like every credit spread, it wants the gap between the two options to collapse to zero. An answer that has it profiting as the spread widens is using debit logic.
Maximum Profit and Maximum Loss
- Maximum profit = the net credit received. Reached when the futures settles at or above the higher strike (both puts expire worthless, gap at zero).
- Maximum loss = (strike difference) minus the net credit. Reached when the futures settles at or below the lower strike (both puts in the money, gap at the full strike difference).
- Breakeven (concept): higher strike minus the net credit.
| Put bull spread | Detail |
|---|---|
| Build | Sell higher-strike put, buy lower-strike put (same expiration) |
| Cash flow | Net CREDIT (premium received) |
| Outlook | Bullish (or neutral-to-up) |
| Profits when | Futures rises/holds up; the put-value gap NARROWS toward zero |
| Maximum profit | net credit received |
| Maximum loss | (strike difference) minus net credit |
Example: sell the 110 put and buy the 100 put for a net credit of 4.
- Strike difference = 110 minus 100 = 10.
- Maximum profit = 4 (the credit), reached at or above 110.
- Maximum loss = 10 minus 4 = 6, reached at or below 100.
- Breakeven = 110 minus 4 = 106.
- Check: max profit plus max loss = 4 plus 6 = 10, the strike difference. Foots.
Exam Tip: Gotchas
- A put bull spread is BULLISH, even though it is built from puts. The direction comes from the position, not the option type. Writing the higher put is a bet the market stays up. An answer that reads "puts, therefore bearish" has fallen for the trap.
- It is a CREDIT, and it is the bullish twin of the call bull spread's debit. Both are bullish; one collects premium (puts), the other pays it (calls). This is the pairing: a bull view splits into one debit and one credit.