The Basics of Vertical Spreads (Bull Put and Bear Call Spreads)

When you first enter the options world, it’s easy to get caught up in buying single calls and puts. They feel intuitive: pay a premium, and maybe you get a big payoff. But professionals know there’s a smarter way to stack probabilities in your favor while limiting risk. Enter the vertical spread.

Vertical spreads are the bread-and-butter of risk-defined options trading. They’re built by combining two options of the same type (both calls or both puts), with the same expiration date, but at different strike prices. The result: you define both your maximum profit and maximum loss before you even place the trade.

In this article, we’ll cover two of the most practical vertical spreads for income traders: the bull put spread and the bear call spread.

Why Use Vertical Spreads?

A single short option (say, selling a naked put) can be lucrative, but it carries large, sometimes unlimited, risk. A vertical spread reins that in. By buying another option against your short position, you cap the risk while still keeping most of the probability edge that premium sellers enjoy.

Think of it as building a fence: the short option is the open field, the long option is the fence line that keeps your risk contained.

The Bull Put Spread

The bull put spread is a bullish-to-neutral strategy.

• Setup: Sell a put at one strike, buy another put at a lower strike (same expiration).

• Goal: Collect premium, profit if the stock stays above the short strike.

• Risk/Reward: Maximum profit is the net premium collected. Maximum loss is the distance between strikes minus that premium.

Example:
Stock trades at $50.

• Sell the $48 put for $2.00.

• Buy the $45 put for $1.00.

• Net credit: $1.00.

If the stock stays above $48 at expiration, you keep the full $100 credit. If the stock falls below $45, you lose $200, offset by the $100 credit for a max loss of $100.

This is how professionals often “sell puts with a seatbelt.”

The Bear Call Spread

The bear call spread is the mirror image, a bearish-to-neutral trade.

• Setup: Sell a call at one strike, buy another call at a higher strike (same expiration).

• Goal: Collect premium, profit if the stock stays below the short strike.

• Risk/Reward: Maximum profit is the net premium collected. Maximum loss is the distance between strikes minus that premium.

Example:
Stock trades at $50.

• Sell the $52 call for $1.50.

• Buy the $55 call for $0.50.

• Net credit: $1.00.

If the stock stays below $52, you keep the full $100 credit. If it rallies above $55, you lose $200, offset by the $100 credit for a max loss of $100.

This is how pros “sell calls with a helmet on.”

Why These Matter

Bull put spreads and bear call spreads are the core strategies behind iron condors, credit spreads, and many professional income systems. They give traders:

• Defined risk - you know your max loss.

• Consistent probabilities - time decay works in your favor.

• Flexibility - bullish, bearish, or neutral setups depending on strike selection.

They aren’t about swinging for the fences. They’re about stacking small, repeatable wins while keeping losses manageable.

Final Takeaway

The real lesson here is that vertical spreads allow you to act like an insurance company, collecting premiums while controlling risk. The bull put spread works best when you think the market will hold steady or climb. The bear call spread works best when you expect a pause or decline.

Together, they’re the foundation for building more advanced strategies, but even on their own, they’re enough to run a disciplined, income-oriented options portfolio.

Probabilities over predictions,

Andy Crowder

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