What Is a Bull Put Spread?

A Bull Put Spread is an options strategy used when you expect the market to move moderately up or remain sideways.

It is a credit spread, meaning you receive a net premium upfront. Both the risk and reward are limited, making it a safer alternative to selling naked Puts.

🔹 How It Works

• Use two Put options of the same stock/index and the same expiry:
  1. Sell (write) a higher strike Put (near current market price).
  2. Buy a lower strike Put (further OTM) to protect against sharp downside moves.

🔹 Example

• Underlying: Nifty trading at 20,000
• Strategy: Bull Put Spread (monthly expiry)

1. Sell 19,800 Put at ₹150 premium
2. Buy 19,600 Put at ₹80 premium

Net Premium Received = 150 – 80 = ₹70 per lot

• If lot size = 50 → Total Credit = ₹3,500

🔹 Payoff Scenarios

1. If Nifty closes above 19,800
   • Both Puts expire worthless.
   • You keep the entire premium = ₹70 profit per lot (₹3,500 total).
2. If Nifty closes between 19,600 and 19,800
   • Short Put loses value, but long Put reduces the damage.
   • Net outcome = Partial profit or limited loss.
3. If Nifty closes below 19,600
   • Both options are in the money.
   • Maximum Loss = Difference in strikes – Net Premium
     = (19,800 – 19,600) – 70
     = 200 – 70 = ₹130 per lot (₹6,500 total).

🔹 Strategy Summary

• Market View: Moderately bullish (expect price to stay above the higher strike).
• Risk: Limited (maximum loss = ₹130 per lot in this example).
• Reward: Limited (maximum profit = net premium received = ₹70 per lot).
• Best Case: Market closes above 19,800 → maximum profit.
• Worst Case: Market closes below 19,600 → maximum loss.