OpenPositions education editorial · Reviewed: 2026-10-30
Bull put spread: maximum loss, breakeven and an expiry payoff exercise
Receiving a premium is a cash flow, not a completed profit. Work through a clearly labelled 100/95 put-spread example before exploring the course.
Start the free exercise ↓Two puts, one expiry
A put gives its buyer the right to sell the underlying at the strike under the contract terms. A bull put spread sells one put at a higher strike and buys another at a lower strike, with the same underlying, expiry, multiplier and quantity. The net credit is the premium received minus the premium paid.
A hypothetical position, before fees
Sell one $100-strike put and buy one $95-strike put with the same expiry. Assume a net credit of $1 per share and a standard 100-share multiplier. You receive $100, but the $500 strike-width exposure means maximum expiry loss is $400 after that credit. Maximum expiry profit is $100 and expiry breakeven is $99.
Cash received is not earned profit
At expiry prices of $100 or above, the simplified model earns $100. At $99 it breaks even; at $97 it loses $200; at $95 or below it loses $400. Before expiry the cost to close can change with price, time, volatility and bid/ask spreads. This expiry diagram does not value an open position today.
What to check on a practice ticket
Check the underlying, put type, same expiry, quantities, higher short strike, lower long strike, multiplier and net credit. A credit label alone does not prove that the ticket is correct. With physically settled American-style options, early assignment, expiration uncertainty or closing one leg can create stock exposure outside this simplified two-leg payoff. Fees increase loss and reduce profit.
Check your understanding
The example receives $100 at entry. Is $500 its maximum expiry loss, and is the $100 already realized profit?
Show the explanation
Neither. Maximum expiry loss is ($100 − $95 − $1) × 100 = $400 before fees. The $100 is the entry credit; the final result depends on closing both legs or settlement. Complete the exercise below to distinguish credit, risk and payoff.
Free sample exercise: understand before deciding
An original public introductory exercise, with no account required. All figures are hypothetical, not quotes, trade records or order recommendations.
Sell 1 × 100 put + buy 1 × 95 put; same expiry; $1 net credit per share; multiplier 100.
Total expiry P&L: +$100 (before fees)
The expiry model assumes both legs settle under their contract terms. It does not model early assignment, physical delivery, unpaired-leg exposure or pre-expiry market value.
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Does this way of learning suit you?
This is a public introductory sample. Structured lessons and further practice require a separate course purchase. Completing this page does not unlock paid material or guarantee trading income. Review the curriculum and access terms before deciding.
Education only, not trade recommendations. Examples are hypothetical, not account records or market quotes. Expiry payoff is not pre-expiry market value.
Mechanics reference: OIC: Bull put spread mechanics and risks. The source supports contract mechanics; it does not endorse this course or example.