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Bull put spread: when the premium you collected is really yours

See whether time helps or hurts this credit spread at $90, $92.50, $95, and $100, and why, close to expiration, the gain left keeps shrinking while the risk left does not.

Bull put spread · Sell 1 95 Put / Buy 1 90 Put · 30 days

Open in the full Lab
TodayDay 30
Day 1515 days to expiration · 15d left
IV shift
P&L+$40

Time-slice chart

5 scenarios from Today to Day 30. If the price stays at 85, P&L goes from −$322 to −$407. If the price stays at 90, P&L goes from −$218 to −$407. If the price stays at 92.5, P&L goes from −$157 to −$157. If the price stays at 95, P&L goes from −$97 to +$93. If the price stays at 100, P&L goes from $0 to +$93. Cursor on Day 15.

Left and right arrows change the day; up and down switch the scenario price.

Price-slice chart

P&L across prices $74.00 to $126.00. At expiration: breakeven $94.07, max profit +$93, max loss −$407. On Day 15 at $100.00: +$40.

Left and right arrows move the price.

P&L heatmap

LossProfit

Time-effect map

Time hurtsTime helps

At $100.00 · Day 15

Upside left to expiration

+$54

Downside left to expiration

−$446

From +$40 now · If the price stays at $100.00: +$54 · Upside to downside 0.1 : 1

Position at expiration

Max profit

+$93

At $95.00 or above

Max loss

−$407

At $90.00 or below

Breakeven

$94.07

At expirationDay 15: $97.82

All figures are Black-Scholes model estimates, not market quotes or guarantees.

P&L by price and day (model estimate, current price 100, IV 30%, 30 days)

P&L by price and day (model estimate, current price 100, IV 30%, 30 days)
Underlying priceDay 0Day 7.5Day 15Day 22.5Day 27Day 30
85−$322−$339−$362−$390−$405−$407
90−$218−$227−$241−$269−$310−$407
92.5−$157−$157−$157−$156−$156−$157
95−$97−$88−$75−$47−$6+$93
100$0+$17+$40+$71+$90+$93

Structure, capital, and P&L at expiration

A bull put spread has two legs: you sell a put with a strike of 95 and buy a put with a strike of 90, both expiring in 30 days. Every number on this page assumes a current price of $100, implied volatility (IV) of 30%, a 4% risk-free rate, no dividends, 30 days to expiration, and one contract per leg.

The 95 put brings in $1.33 a share and the 90 put costs $0.40, for a net credit of $93.26.

  • Max profit: $93.26, the credit, kept at $95 or above.
  • Max loss: $406.74, at $90 or below: the $500 width less the credit.
  • Breakeven: $94.07.

Brokers typically require margin equal to the max loss, $406.74, while the spread is open. The possible loss is 4.4 times the possible gain, which is common for credit spreads with out-of-the-money strikes. At entry, Delta is +15.33 and the instantaneous Theta is +$1.93 a day.

Time profile

  • At $100, time pays early: +$40 by day 15, +$71 by day 22.5, +$90 by day 27, out of a maximum of +$93.
  • At $95, the short strike, the position starts at −$97 and turns positive only on day 27.4. 74% of the gain arrives in the last 7.5 days.
  • At $92.50, the midpoint, time changes almost nothing: about −$157 from start to finish.
  • At $90, time costs money: −$218 to −$407, 73% of it in the last 7.5 days.
  • At $85, below both strikes, the loss grows from −$322 to −$407.

$92.50: a time-neutral line that hardly moves

The time-neutral price is $92.52 on day 0, $92.50 on day 7.5, $92.49 from day 15 through day 27, and $92.57 with 1 day left. Above it, time pays you; below it, time costs you.

It sits at the midpoint of the strikes for the same reason as in every vertical spread. Above $92.50 the short 95 put holds more time value than the long 90 put, so its decay works for you; below it, the long put holds more.

At the short strike: the last 3 days decide

At $95, the position shows −$47 on day 22.5 and −$6 on day 27, then +$93 at expiration. About $99 of the result arrives in the last 3 days, as the short put’s time value runs out.

Far from the strikes, little is left to earn by then. At $100, instantaneous Theta falls from +$4.72 a day on day 22.5 to +$2.87 on day 27 and +$0.14 with 1 day left.

What is left to gain or lose on day 27

At $100 on day 27, the spread shows +$90. The Lab’s metric tiles put the rest in two numbers:

  • Upside left to expiration: about +$3, up to the +$93 max profit.
  • Downside left to expiration: −$497, down to the −$407 max loss if the price falls below $90.

The gain left keeps shrinking as expiration approaches; the risk left does not. On day 0 the same tiles read +$93 and −$407 from a P&L of $0; by day 27, almost all of the possible gain has been earned, and none of the possible loss has gone away.

Try it in the Lab: three experiments

  1. Watch the $95 line cross zero in the last 3 days: −$6 on day 27, +$11 on day 28 (where the cursor opens), and +$93 at expiration.

    Open in the Lab

  2. Set the day slider to day 27 with the cursor at $100 and read the metric tiles: the upside left to expiration is about +$3, the downside left is −$497.

    Open in the Lab

  3. Move both legs down $5, to strikes of 90 and 85. The time-neutral line moves with them, to about $87.50.

    Open in the Lab

Three common misconceptions

  • MisconceptionWith a credit strategy, time is always your friend.

    What the numbers showBelow $92.50, time is the enemy: at $90 the spread goes from −$218 to −$407, 73% of that in the last 7.5 days.

  • MisconceptionIf the price sits at the short strike of 95, you’re safe.

    What the numbers showIt does reach the full +$93 at expiration, but the position shows a loss along the way: still −$6 on day 27, positive only from day 27.4.

  • MisconceptionThe closer to expiration, the less risk is left.

    What the numbers showAt $100 on day 27, at most about $3 more can be gained (+$90 to +$93), while a fall below $90 would take the position to −$407, $497 below where it stands. The gain left shrinks; the risk left does not.