Bull put spread: getting paid to be bullish

Selling premium with training wheels

Here's where vertical spreads get interesting. So far we've been paying for trades — debits. But you can also get PAID to put one on. A bull put spread does exactly that. You sell a put closer to the stock price (where premium is fat), and you buy a put further below it (cheaper, but it caps your downside). The premium you collect from the short put is bigger than what you pay for the long put. Net result: money flows IN to your account. That's called a credit.

Why would anyone pay you premium? Because the short put obligates you to BUY the stock at that strike if the buyer chooses to exercise. You're getting compensated for taking on that obligation. The long put you bought at the lower strike is your insurance — it limits how far the damage can go if the stock craters. Think of the long put as a fire extinguisher and the credit as your fee for renting it out.

Notice the trade-off. With the bull call debit spread, you could risk $180 to make $320 — risk-reward in your favor, but the stock has to actually go up. With the bull put credit spread, you risk $380 to make $120 — risk-reward against you, but you win as long as the stock simply STAYS above $95. You don't need it to rally. You don't even need it to move. Time decay does the work. That's the credit spread trade-off in one line: higher win rate, smaller reward per win.

One detail brokers don't always make obvious: even though you collect a credit, your broker holds margin against the max loss. So that $380 worst case isn't free capital — it's locked while the position is open. Don't confuse 'credit received' with 'capital deployed.' On a $500 account, a single $5-wide credit spread might use most of your buying power.

Recap: bull put spread = sell higher put + buy lower put, same expiry. You receive a credit. You win if the stock stays above the short strike. Higher probability, smaller payoff, capital tied up in margin.