What is a Bull Put Spread?

A Bull Put Spread is a “defined-risk” options strategy used when the market view is bullish to moderately bullish. It involves selling a higher strike put and buying a lower strike put with the same expiry. 

Generally, the premium received from the short put is higher than the premium paid for the long put, which results in a “net credit”. In a Bull Put Spread strategy:

• Maximum Profit = Net Premium Received × Lot Size
• Maximum Loss = (Higher Strike – Lower Strike – Net Premium) × Lot Size

Traders may note that the maximum loss is limited because the long put provides protection below the lower strike.

How to Execute the Bull Put Spread Strategy in India?

Let’s understand through a bull put spread Nifty example. Suppose NIFTY is trading at 25,000. A trader “sells” 25,000 Put at ₹180 and “buys” 24,800 Put at ₹100. By doing so, they receive a net premium of ₹80 (₹180 – ₹100). 

Now, assume that at expiry, NIFTY remains above 25,000. Consequently, both puts expire worthless, and the premium received becomes the maximum profit, before applicable charges and taxes.

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