Strategy
Bull put spread
Sell a put and buy a lower-strike put. You collect a premium up front and keep it if the index stays above the sold strike.
View: bullishCredit (you receive)Limited risk
How it is built
- Sell 1 lot of an out-of-the-money put (PE).
- Buy 1 lot of a further out-of-the-money put (PE), same expiry, as protection.
A structure for a view that the index will stay above a level by expiry, with the loss capped by the bought put.
Risks
- The maximum loss (strike difference minus premium) is larger than the maximum profit.
- A sharp fall can take the position to its maximum loss quickly.
- Selling options needs margin set by the exchange (SPAN plus exposure margin), usually far more than the premium received.
How the Greeks behave
- Delta
- Positive
- Theta
- Positive while the index stays above the sold strike
- Vega
- Negative: a rise in volatility hurts
Worked example on Nifty 50
| Leg | Premium per unit | Cash flow |
|---|---|---|
| Sell 1 lot 24,750 PE | ₹83.61 | +₹5,434 |
| Buy 1 lot 24,250 PE | ₹10.20 | −₹663 |
Net received
₹4,772
Max profit
₹4,772
Max loss
₹27,728
Break-even
24,677
Profit and loss at expiry
For the whole position, before charges.
Premiums are theoretical Black–Scholes values from round, illustrative inputs, not market prices. Charges and margin are not included.Price a single leg with your own numbers.
Bull put spread on other indices
Frequently asked questions
What is the maximum profit on a bull put spread?
The net premium received, if the index ends above the sold put strike at expiry.
What is the maximum loss?
The difference between the strikes minus the net premium, times the lot size, if the index ends below the bought put strike.
Why buy the lower put?
It caps the loss and lowers the margin compared with selling a put on its own.