Vertical spreads
What is a Bull Put Spread (Credit Put Spread) and how does it generate income with defined risk?
By Easy Money Scanner · Educational reference · Not investment advice
The short answer
A bull put spread involves selling a put at a higher strike and buying a put at a lower strike for protection, collecting a net credit upfront and profiting if the stock stays above the short strike, offering defined risk income generation compared to a naked put.
How it works
The long put caps the maximum loss at the difference between strikes minus the credit received, making this a popular defined-risk alternative to selling naked puts for traders with moderately bullish or neutral outlooks.
An example
Selling a $45 put for $2 and buying a $40 put for $0.50 creates a $1.50 net credit, with maximum loss capped at $3.50 if the stock falls below $40.
Risk & limitations
OIC notes maximum loss can still be substantial relative to premium received if the stock falls sharply below both strikes before expiration.
Examples are hypothetical, not trade recommendations. US contract and regulatory references do not automatically apply in Canada. Rules, margin requirements and broker policies can change; confirm them with the relevant authority and your broker.