# Bull Put Spread: Credit, Breakeven, Defined Loss, and Assignment Risk

Build a bull put credit spread, calculate its expiration payoff, and manage volatility, early assignment, margin, liquidity, and expiration risk.

Canonical: https://wiki.fcontext.com/options/bull-put-spread/
Fact checked: 2026-07-22

> For educational purposes only; not investment advice.

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## Direct answer

A **bull put spread**, or put credit spread, sells a put at a higher strike and buys a put at a lower strike with the same underlying, expiration, exercise style, settlement, multiplier, and quantity. It normally opens for a net credit and expresses a view that the underlying will remain at or above the short-put strike.

Maximum expiration profit is the initial credit. Maximum contractual loss is `strike width − net credit`, multiplied by the contract multiplier. The lower-strike long put limits downside only while both legs remain intact and settle as expected.

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## Payoff and pre-expiration behavior

Let the short-put strike be `K_H`, the long-put strike `K_L`, with `K_H > K_L`, and net credit `C`. Expiration profit per underlying unit is:

`C − max(K_H − S_T, 0) + max(K_L − S_T, 0)`

- If `S_T ≥ K_H`, both puts have no intrinsic value and profit is `C`.
- If `K_L < S_T < K_H`, profit declines dollar for dollar as spot falls.
- If `S_T ≤ K_L`, loss is capped at `(K_H − K_L) − C`.
- Expiration breakeven is `K_H − C`, before fees.

Before expiration, the spread generally has positive delta, negative gamma, positive theta, and negative vega, but magnitudes and even some signs vary with spot, time, rates, and put skew. A volatility decline or time passage can help; a downside gap, skew steepening, or wider markets can overwhelm decay.

The credit is consideration for an open short-option obligation, not realized income. American-style short puts can be assigned early, especially when deep in the money with little extrinsic value. Assignment creates long shares at `K_H`; the long put remains a separate contract and may still contain time value.

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## 95/90 put spread example

Suppose the underlying is `$100`. Sell one 95 put and buy one 90 put with the same expiration for a `$1.20` net credit and 100-share multiplier.

- Maximum profit: `$1.20 × 100 = $120`.
- Strike width: `$95 − $90 = $5`.
- Maximum loss: `($5 − $1.20) × 100 = $380`.
- Expiration breakeven: `$95 − $1.20 = $93.80`.

At a `$100` expiration price, both puts have no intrinsic value and profit is `$120`. At `$93`, the short put is worth `$2` and the long put zero, so profit is `($1.20 − $2) × 100 = −$80`. At `$85`, the short put is worth `$10` and the long put `$5`; the `$5` spread value produces the maximum `$380` loss.

Maximum reward relative to contractual risk is `$120 / $380 ≈ 31.6%`, but this is not a success probability or expected return. Fees and executable prices reduce the figure.

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## Trade and expiration checklist

- Verify both legs share underlying, expiration, exercise style, settlement, multiplier, and quantity.
- Use the executable complex-order credit, not favorable individual midpoints.
- Convert credit, maximum loss, fees, margin, and stress paths into account dollars.
- Compare with a cash-secured put, including the different downside, funding, and share-acquisition outcomes.
- Inspect liquidity and volatility skew at both strikes.
- Stress a slow decline, gap below the long strike, volatility surge, skew steepening, and spread widening.
- Monitor short-put extrinsic value and early-assignment risk when it becomes deep in the money.
- Plan for pin risk and unintended long shares near expiration.

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## Common misconceptions

- “The credit is profit when received.” It accompanies an unresolved short-put obligation.
- “The stock must rise to profit.” Maximum profit occurs anywhere at or above the short strike at expiration.
- “Defined loss eliminates margin risk.” Broker requirements and assigned shares can create temporary demands.
- “The long put automatically handles assignment.” It remains separate until sold or exercised.
- “Positive theta guarantees a gain every day.” Price, gamma, volatility, skew, and liquidity can dominate.
- “Rolling avoids realizing a loss.” It closes one spread and opens another with new economics.

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## Related topics

- [Vertical Spreads](/options/vertical-spread/)
- [Assignment Risk](/options/assignment-risk/)
- [Cash-Secured Put](/options/cash-secured-put/)

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## Authoritative sources

- [Characteristics and Risks of Standardized Options](https://www.theocc.com/company-information/documents-and-archives/options-disclosure-document) - Options Clearing Corporation
- [Bull Put Spread (Credit Put Spread)](https://www.optionseducation.org/strategies/all-strategies/bull-put-spread-credit-put-spread) - Options Industry Council
- [Options](https://www.finra.org/investors/investing/investment-products/options) - FINRA
- [Margin Manual](https://cdn.cboe.com/resources/membership/Margin_Manual.pdf) - Cboe