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Bull put spread

Sell a put, buy a lower put. Get paid upfront to be mildly bullish — with a safety net.

Lesson 3 of 127 min read

The idea

You're bullish or at least "not bearish": you think NIFTY won't fall below 22,400 in two weeks. Selling a put pays you for that view — but a naked put has a nasty left side. So you buy a cheaper, lower put as insurance.

LegActionOptionPrice
1Sell22400 PE₹200.45
2Buy22200 PE₹121.10
Net credit₹79.35
You receive
₹5,158
79.35 × 65, upfront
Max profit
₹5,158
At or above 22,400
Max loss
₹7,842
At or below 22,200
Breakeven
22,320.65
Higher strike − credit

The payoff

22,400

If NIFTY ends at 22,400, you make ₹5,158.

Bull put spread 22400/22200. Keep the full credit if NIFTY stays at or above 22,400.
NIFTY at expiryWhat happensNet P&L (1 lot)
22,800Both puts expire worthless — keep the credit+₹5,157.75
22,400Both worthless — keep the credit+₹5,157.75
22,300Sold put costs 100, credit was 79.35−₹1,342.25
22,200Sold put costs 200, bought put worth 0−₹7,842.25
21,800Sold put costs 600, bought put pays back 400−₹7,842.25

The bought 22,200 put is the safety net: below 22,200 it gains exactly what the sold put loses, so the loss can never exceed (200 − 79.35) × 65 = ₹7,842.25.

Notice what makes money here

Look at the graph: the whole right side is profit, including the area where NIFTY doesn't move at all. You make money if NIFTY rises or stays flat or falls a little (to 22,320).

That's the magic of a credit spread — time is on your side. Each day without a fall, both puts lose time value, and the spread gets cheaper to buy back.

Bull call spread (debit)

  • Pay upfront.
  • Needs NIFTY to actually rise.
  • Theta hurts slightly.
  • Better when IV is low.

Bull put spread (credit)

  • Get paid upfront.
  • Wins even if NIFTY just sits still.
  • Theta helps.
  • Better when IV is high.

Quick check

NIFTY expires at 22,350. What's the P&L of the 22400/22200 bull put spread (credit 79.35) per unit?