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Strategy: Bull Put , 1 strike down to ATM strike

a.k.a. Bull Put Spread, Bull Put Vertical

Bull Put Neutral Option Graph

The Outlook: Neutral to mildly bullish. The stock must remain near where it is when you enter the position, or move higher, by expiration.

The Trade: buy Put OTM and sell Put ATM.

Gains when: stock stays put, or falls slightly, or rises.

Maximum Gain: initial credit.

Loses when: stock falls too much.

Maximum Loss : limited to the difference in strike prices - the initial credit.

Breakeven Calculation: Short Put strike - initial credit

Advantages compared to stock: limited risk, less capital needed, greater leverage, can gain even if stock drops slightly.

Disadvantages compared to stock: gains are limited to the upside if stock rises more than the sold strike, no dividends.

Volatility: after entry, increasing implied volatility is positive if the stock falls, but negative if the stock rises.

Time: after entry, the passage of time is positive if the stock rises, but negative if the stock falls.

Margin Requirement: the difference in strike prices x number of shares represented.

Variations: see the Vertical Spread Strategies page and the All Bull Put credit spread graphs page.

Synthetic Equivalent: Long Stock plus Long Put ITM plus Short Call OTM. (A "collar".)


  • This Bull Put can be used if you are mildly bullish on a stock and also want a little bit of downside protection.
  • This Bull Put and the equivalent Bull Call are probably the most similar pure options strategies to the Covered Call or Collar, with the added advantage of a known and limited risk. The strategies retains some "downside protection" as well as limited gains to the upside.
  • The gains are limited to the upside, so you don't want to be "too" bullish.
  • The best time for entry of this Bull Put is when a stock has higher than normal implied volatility, and you expect the stock to stay at current levels or go higher. Entering when volatility is higher will reduce the debit on entry, which lowers the breakeven and gives more downside protection. If the stock price then stays reasonably steady or rises, both the passage of time and the IV returning to normal (lower) levels will benefit the strategy.
  • The Bull Call, -1 to ATM is a nearly identical trade, done with calls instead of puts, and entered for a debit instead of a credit. One advantage of the call strategy is that if the stock moves bullishly like you expect, the long call can be exercised to buy stock if you are bullish for the longer term.


  • Since this is a neutral to bullish position, the trader is expecting the stock to stay put or rise. If the stock falls instead, the trader would be wise to cut his losses short. Using the example graph, if the stock fell to about $47.50 at any time, the trade could be exited for a loss of about $100. Just sitting and waiting could likely result in the maximum loss of $342 - more than three times that much.
  • If the stock stays above the breakeven point, the trader should stick with the position. As the option graph shows, just the passage of time is a benefit at any stock price above breakeven.
  • If the stock falls and you do not trade out of the position before expiration, it is possible to receive an automatic exercise on the long put, so you will sell the stock, and be assigned on the short put, so you will buy the stock. See the Rules, Tips, & Techniques page for more.


  • It is not usually recommended to adjust one part of a Bull Put. If you take a trading profit on the short puts when the stock rises for instance, you are actually increasing your maximum risk. You might think you will sell the puts again the next time the stock goes down, but what if it doesn't?
  • It is possible to roll the entire bull put to lower strike prices if the stock drops, but that really amounts to closing one trade at a loss and opening another trade in hopes of a gain. Plus, the stock has not behaved bullishly yet you are taking a second bullish position.
  • If the stock is over the sold put strike with expiration near and you have made 80% or so of the total possible on the short puts, you can roll everything out to the next month, and higher strike prices, if you are still bullish on the stock.

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