Bull put spread max loss, explained with real math
On a bull put spread, the most you can lose at expiration is the distance between the strikes, minus the credit you collected, times 100 shares per contract. The credit is the most you can make.
What a bull put spread is
A bull put spread has two legs with the same expiration:
- Sell to open one put at a higher strike. This is the short put. It pays you premium.
- Buy to open one put at a lower strike. This is the long put. It costs less, and it caps your loss.
Because the put you sell is worth more than the put you buy, you receive a net credit when you open the trade. You make your maximum if the stock stays at or above the short strike through expiration. It is a "credit spread" because money comes in up front.
The formulas
Fees are extra: subtract them from the gain and add them to the loss. The breakeven above is before fees.
Worked example
Example numbers
A stock trades at $104. You sell 1 put at the $100 strike and buy 1 put at the $95 strike, same expiration, for a net credit of $1.50.
With 3 contracts instead of 1, multiply everything by 3: max gain $450, max loss $1,050. The breakeven stays at $98.50.
What happens at expiration
Here is the same example at a range of closing prices, before fees. The P/L is the credit, minus what the short put is worth, plus what the long put is worth.
| Stock at expiration | $100 put (short) | $95 put (long) | P/L |
|---|---|---|---|
| $104 | $0 | $0 | +$150 |
| $100 | $0 | $0 | +$150 |
| $98.50 | −$150 | $0 | $0 |
| $97 | −$300 | $0 | −$150 |
| $95 | −$500 | $0 | −$350 |
| $90 | −$1,000 | +$500 | −$350 |
Below $95, every extra dollar the short put loses is matched by a dollar the long put gains. That is why the loss stops growing at $350. Check the $97 row: the short put is $3 in the money, so 1.50 − 3.00 = −1.50, or −$150 per contract.
Try other strikes and credits in the credit spread calculator.
Why the max loss is "width minus credit"
Think of it this way. In the worst case, the stock is below both strikes. You are obligated to buy 100 shares at $100, and you have the right to sell them at $95. That $5 gap is $500 per contract. You were paid $150 up front, so your net worst case is $500 − $150 = $350.
The width is the hard limit. The credit is a partial refund of that limit, paid in advance. A bigger credit on the same width means a smaller max loss, but usually also a short strike closer to the current price, so the spread is more likely to lose.
Reward vs risk
In the example you risk $350 to make $150. That is common for credit spreads: the max gain is often smaller than the max loss. It is not good or bad on its own. It just means a single max loss can wipe out the gains from more than two max-gain trades of the same size ($350 ÷ $150 ≈ 2.3). Seeing that ratio before you click is the point.
Things that can make it messier
Early assignment
Most US stock and ETF options are American-style, which means the short put can be assigned before expiration. If that happens, you buy 100 shares at the short strike, $100 in the example, and you still hold the $95 put. The protection is still there, but you now hold shares plus a put rather than a spread, and the account needs to handle the cost of the shares. Ask your broker how it treats this.
Finishing between the strikes
If the stock closes between $95 and $100 at expiration, the short put is in the money and will normally be assigned, while the long put expires worthless. You would end up owning 100 shares bought at $100 over the weekend, with no protection left. Many traders close the spread before expiration to avoid this, but closing has its own cost and fees.
Buying power
Your broker will set aside money while the spread is open, commonly about the max loss. The exact amount depends on your broker and account type.
Closing early
You can buy the spread back before expiration. The price you pay depends on the stock price, time left and volatility, so your actual result can land anywhere between the max gain and the max loss.
Checklist before you submit
- The short put has the higher strike; the long put has the lower strike.
- Both legs have the same expiration.
- The ticket shows a net credit, not a debit.
- You can say the max loss out loud: (width − credit) × 100 × contracts.
- The quantity is the number of spreads you meant.
FAQ
How do you calculate the max loss on a bull put spread?
Subtract the long strike from the short strike to get the width, subtract the net credit, and multiply by 100 and the number of contracts. A $100/$95 spread sold for $1.50 has a max loss of (5 − 1.50) × 100 = $350 per contract, plus fees.
What is the max profit on a bull put spread?
The net credit received times 100 per contract. You keep all of it if the stock is at or above the short strike at expiration.
What is the breakeven on a bull put spread?
The short strike minus the net credit. In the example, $100 − $1.50 = $98.50.
Can you lose more than the max loss on a bull put spread?
At expiration with both legs in place, the loss is capped at the max loss plus fees. Early assignment, closing only one leg, or the stock finishing between the strikes can leave you with a different position, such as shares, that carries its own risk.
Is a bull put spread bullish or bearish?
It is mildly bullish to neutral. It makes its max gain if the stock stays at or above the short strike; it does not need the stock to rise.
Educational only. This page explains order mechanics with example numbers. It is not investment advice, not a recommendation to buy or sell anything, and not a broker. Check your own broker’s rules, fees and assignment terms before you trade.