What Is a Put Spread?
A put spread, also known as a vertical put spread, is an options strategy that involves simultaneously buying and selling put options on the same underlying stock with the same expiration date but at different strike prices. Put spreads can be used in a volatile market to leverage anticipated stock movement while also providing limited risk.
There are two main types of put spreads. A bear put spread (debit spread) profits when the stock price falls, while a bull put spread (credit spread) profits when the stock price stays above a certain level. Both strategies have defined maximum profit and maximum loss, making them popular among traders who want controlled risk exposure.
Bear Put Spread vs. Bull Put Spread
- Bear Put Spread (Debit): Buy a put with a higher strike price and sell a put with a lower strike price. You pay a net debit to enter the trade. This is a bearish strategy that profits when the stock falls below the breakeven price. Purchasing a put with a higher strike price than the written put provides a bearish strategy.
- Bull Put Spread (Credit): Sell a put with a higher strike price and buy a put with a lower strike price. You receive a net credit to enter the trade. This is a bullish strategy that profits when the stock stays above the short put strike. Purchasing a put with a lower strike price than the written put provides a bullish strategy.
How to Calculate Put Spread Profit and Loss
Understanding the math behind put spreads is essential for evaluating whether a trade is worth taking. Here are the key formulas for both types:
Bear Put Spread (Debit)
- Net Debit: Long Put Premium − Short Put Premium. This is the cost to enter the trade.
- Max Profit: (Long Strike − Short Strike − Net Debit) × Contracts × 100. Achieved when the stock closes at or below the short put strike.
- Max Loss: Net Debit × Contracts × 100. Occurs when the stock closes at or above the long put strike.
- Breakeven: Long Put Strike − Net Debit.
Bull Put Spread (Credit)
- Net Credit: Short Put Premium − Long Put Premium. This is the income received when entering the trade.
- Max Profit: Net Credit × Contracts × 100. Achieved when the stock closes at or above the short put strike.
- Max Loss: (Short Strike − Long Strike − Net Credit) × Contracts × 100. Occurs when the stock closes at or below the long put strike.
- Breakeven: Short Put Strike − Net Credit.
How to Use This Put Spread Calculator
- Enter the Current Stock Price: Input the current market price of the underlying stock.
- Set the Long Put: Enter the strike price and premium for the put option you are buying.
- Set the Short Put: Enter the strike price and premium for the put option you are selling (writing).
- Specify Contracts: Enter the number of option contracts (each contract controls 100 shares).
- Set Days to Expiration: Enter how many days remain until the options expire.
- Adjust Implied Volatility: Set the IV percentage for each leg. Higher IV increases the theoretical value of both options.
- Review Results: The calculator instantly displays max profit, max loss, breakeven, net Greeks, and an interactive payoff diagram showing both expiry and current P/L curves.
Why Use Our Put Spread Calculator?
Interactive Payoff Diagram
Visualize profit and loss at expiration and before expiry on a single chart. See exactly where your breakeven lies for both bear and bull put spreads.
Black-Scholes Pricing
Estimate the theoretical spread value before expiry using the Black-Scholes model with implied volatility and time decay for each leg independently.
Net Greeks Display
View the net Delta, Gamma, Theta, Vega, and Rho for the entire spread to understand how your position responds to price, time, and volatility changes.
Completely Free
No registration, no limits. Use our put spread calculator as many times as you need — 100% free.
Choosing Strike Prices for a Put Spread
Strike selection is one of the most important decisions when building a put spread. Here is how different configurations affect your trade:
- Narrow Spread (Strikes Close Together): Lower cost to enter but also lower maximum profit. Better for high-probability trades with smaller expected moves.
- Wide Spread (Strikes Far Apart): Higher cost but higher maximum profit potential. Better when you expect a larger price move in the underlying stock.
- ATM Long Put: Buying an at-the-money put gives you the highest delta exposure and the most responsive position to stock price changes.
- OTM Short Put: Selling an out-of-the-money put reduces your net cost while still providing downside protection up to the short strike.
How Implied Volatility Affects Put Spreads
Implied volatility (IV) affects both legs of a put spread, but the net impact depends on the spread configuration:
- Bear Put Spread: Generally benefits from rising IV since the long put gains more value than the short put. However, the net vega is typically small because the two legs partially offset.
- Bull Put Spread: Generally benefits from falling IV since both puts lose value, but the short put (which you sold) loses more, increasing your profit.
- IV Skew: Put options at different strikes often have different implied volatilities. Lower strikes typically have higher IV (volatility skew), which affects the relative pricing of each leg.
Time Decay and Put Spreads
Time decay (Theta) affects each leg of a put spread differently:
- Bear put spreads have negative net theta — time decay works against you because the long put loses value faster than the short put gains.
- Bull put spreads have positive net theta — time decay works in your favor because the short put decays faster, increasing your profit.
- The net theta is typically small compared to single-leg positions because the two legs partially offset each other.
- Time decay accelerates in the final 30 days before expiration for both legs.