Basics
Bull & Bear Spreads
Four important vertical spreads with clear direction, capped risk, and simple numerical examples.
Overview
Credit or debit, bullish or bearish
Bull Put and Bear Call are credit spreads with premium received upfront. Bull Call and Bear Put are debit spreads with premium paid upfront.
All four variants use the same underlying, the same expiration, and two different strikes.
Credit Bull Put Spread
Bullish to slightly neutral. Sell the higher put and buy the lower put.
- Example Stock 100, short put 95, long put 90, credit 1.20 USD.
- Break-even 93.80 USD.
- Max gain 120 USD, Max loss 380 USD.
Credit Bear Call Spread
Bearish to neutral. Sell the call closer to spot and buy the higher call.
- Example Stock 100, short call 105, long call 110, credit 1.10 USD.
- Break-even 106.10 USD.
- Max gain 110 USD, Max loss 390 USD.
Debit Bear Put Spread
Bearish. Buy the put closer to spot and sell the lower put.
- Example Stock 100, long put 100, short put 95, debit 1.80 USD.
- Break-even 98.20 USD.
- Max gain 320 USD, Max loss 180 USD.
Debit Bull Call Spread
Bullish. Buy the call closer to spot and sell the higher call.
- Example Stock 100, long call 100, short call 105, debit 1.90 USD.
- Break-even 101.90 USD.
- Max gain 310 USD, Max loss 190 USD.