Vertical bull put

Article contents

At a glance

Setting up the bull strategy

  1. Buy one put option on the underlying stock.

  2. Sell one put option on the same underlying stock, with the same expiry date.
Ideally you want the stock to be above the put option’s strike price at expiration.

Who should run this?

Ideal for all traders, from novice to advanced.

Margin requirements

Learn more about Questrade’s option margin requirements.

Strategy overview

A vertical put spread is an option strategy in which a trader buys and sells a short and long put option of the same underlying symbol simultaneously. The put options must have identical expiration dates but different strike prices.

There are two types of vertical put spreads:

Spread type
Bull Used by a trader who thinks the security’s price will rise before the put options expire.
Bear Used by a trader who thinks the security’s price will fall before the put options expire.

To learn more, see Vertical bear put.

Market outlook

  • Slightly bullish

Strategy benefits

  • Limits your total potential risk
  • Offsets the cost of the put option by selling a less expensive put option

Strategy downsides

  • Limits the maximum profit to the initial option premium received if the underlying stock price rises above the short put option strike price.

Vertical bull put example


You believe that ABC shares currently trading at $23 will rise moderately, so you buy a $20 long put option for $125 and sell a $27 short put option for $300. You would receive an initial credit of $175.

This strategy means that you:

  • as the buyer of the put option, have the right to sell the shares at $20 before or at the expiration date

  • as the seller of the put option, have the obligation to buy the shares at $27 before or at the expiration date, if the option is exercised by the buyer.

Possible results

  1. At expiration, the stock’s price closes at $28, meaning both put options would expire worthless. As a result, you keep the $175 credit as profit.

  2. At expiration, the shares close at $18, meaning both put options expire in the money (i.e. the strike prices are above the price of the underlying stock).

    In this case, both put options would be exercised.  The intrinsic value of the put options would be as follows: $200 for the long call; $900 for the short call. The spread value would be $700, leaving you with a total loss of $525 after the initial $175 credit has been applied.

Profit and loss explained

Maximum profit

  • Maximum profit = option premium received – option premium paid

Maximum loss

  • Maximum loss = strike price of short put – strike price of long put – net option premium received

Break-even at expiration

  • Break-even point = strike price of short put – net option premium received

Sample calculations

  • Stock value at start of strategy: $23
  • To execute the strategy: Buy $20 long put option for $125, Sell $27 short put option for $300
  • Result: $175 net credit
Stock price at expiration Profit and loss calculations 
$18 $27 (short put) - $18 (stock price at expiration )= $9 x 100 (long put intrinsic value)
$20 (long put) - $18 (stock price at expiration) = $2 x 100 (short  put intrinsic value)
= $700 spread
$27 (strike price of short put option)
-$20 (strike price of long put option)
= [$7 x 1 option contract x 100 (number of shares) = -$700]
+$175 (total option premium received)
= $525 loss
$28 $3 (short put option premium)
- $1.25 (long put option premium)
x 100 (number of shares)
= $175 profit

: commission fees are not included in the above calculations.

Payoff diagram

Creating a vertical bull put


Standard order details

Order detail


Symbol lookup field

Click  and change the mode to , then enter the symbol you want to buy or sell.

Tip: if you don't know the symbol name, try entering the company name.

The default expiration date, strike price, and strategy appear. 

Modify the expiration date, strike price, and option strategy accordingly. For more information, see Elements of an option quote.

Action The buy or sell action is set for you when you select the strategy type.

Select a value using the arrows , or enter a value manually.

Note: by default, the quantity will be populated with the value set in your user preferences.
Order type Select the type of order you want to submit. When creating strategy orders, only Limit or Market order types are available. For more information, see Order types.

The limit order type requires you to fill in additional fields. Refer to the table section below for details.

Select a duration to specify how long the order should remain active. For more information, see Order durations.

Route Select a route or leave the selection at Auto to let the platform determine the best one. Canadian routes will be listed for Canadian symbols and U.S. routes will be listed for U.S symbols.

This field will be filtered according to the route selection. It indicates where you prefer the order to be executed. Leave the selection at Auto to let the platform determine the best route.

Note: sub-route selection is only available for Canadian symbols.

Specify the account you want to use to submit an order. This field will display the account you have set as your default under user preferences, or the account you have selected in any of the linked windows. See Linking and unlinking windows for details.

Order type-specific details
Limit Enter your limit price:

  • To have the price fluctuate according to real-time data, click the lock   and select either Follow ask price  or Follow bid price .
  • To choose a custom price, select Do not follow .
Note: if real-time market data is not available, the limit price will be blank and the float limit icon will be unlocked.

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