Bull Put Spread

The short put spreads obligate you to sell the stock at Leg 2 if the option is assigned but give you the right to sell stock at Leg 1.

Alias

Short Put Spread, Vertical Spread

Details

A risk-reward-balanced bullish vertical spread approach. It is used when the trader expects the price of the underlying security to rise. It involves selling put options on the security at a certain strike price and simultaneously buying put options on the same security at a lower strike price. The trader profits if the price of the underlying security rises above the strike price of the short put option.

The short put spreads obligate you to sell the stock at Leg 2 if the option is assigned but give you the right to sell stock at Leg 1.

Breakeven

Leg 2 minus the net credit received

Sweet Spot

Stock price to be at or above the Leg2 at expiration, so both options expire worthless.

Max Profit

Profit is limited to the net credit received at the time of the opening option.

Max Loss

Limited Risk to the difference between Leg 1 and Leg 2, minus the net credit received.