Strategies

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Strategies

Bull Put Spread

A clearly bullish credit-spread strategy with defined risk and a very clean P/L profile.

Description

What the strategy consists of

A bull put spread consists of one short put and one lower long put in the same expiration. That creates a net credit at entry.

The strategy is bullish: it performs best when the market stays above the short-put strike.

On the S&P 500, a 30 to 45 DTE window has proven particularly interesting.

P/L Diagram

Schematic at expiration

Bull Put Spread

Bull Put SpreadThe line shows the result along the labelled price axis. Assumptions and legs are listed below.P/L per share (USD)-602859095100105Underlying at expiry (USD)
Credit: 1.20 USDMax. gain: 120 USDMax. loss: 380 USDBE: 93.8 USD
  • Long Put 90
  • Short Put 95
Result at the common expiry, including assumed net premium, excluding fees. P/L per share or option point; multiply by 100 for a standard contract with multiplier 100. White dots = break-even; dashed lines = strikes.

Backtests

SPX over 5 years

The Option Omega backtest shows a remarkably stable curve with low drawdown.

Option Omega bull put spread backtest on SPY over five years Year-by-year bull put spread performance on SPY Backtest parameters and performance of the bull put spread on SPY