Cash-Secured Puts vs. Bull Put Spreads: Choosing the Right Strategy for Capital-Efficient Income

Introduction: One Outlook, Two Tools, But Only One Will Fit You

Imagine two traders. Both believe a stock won’t drop much. Both want to make income from that view. And both turn to puts to express it.

But Trader A sells a cash-secured put and sets aside $9,500 in capital. Trader B sells a bull put spread and risks just $400 for a similar return.

Same thesis. Drastically different mechanics.

So what gives?

This isn’t just a question of which strategy can work, but which one aligns with your account size, risk tolerance, and portfolio purpose. If you’re an income-focused trader trying to balance consistency with capital preservation, this comparison is mission-critical.

What Is a Cash-Secured Put? (CSP)

At its core, a cash-secured put is a promise: “I’ll buy 100 shares of this stock if it drops to my strike price, but you’ll have to pay me a premium today for the privilege.”

To make good on that promise, you’ll need the full amount of cash in your account, hence, cash-secured.

✅ Best Used When:
You’re happy to own the stock and want to get paid while you wait for a lower entry.

✅ Income Mechanics:
You collect premium upfront, which lowers your break-even price. But if the stock stays above the strike, you simply keep the premium and move on.

📌 Trader’s Note: Many value-focused traders use CSPs as “limit orders with benefits.” If you were already planning to buy 100 shares, CSPs offer a better entry, while monetizing time.

What Is a Bull Put Spread?

A bull put spread is a more nuanced version of the same idea—but with built-in downside protection.

You sell one put and buy a cheaper, further-out-of-the-money put. The result?
A net credit (income), but with clearly defined risk.

✅ Best Used When:
You’re bullish but don’t want to tie up much capital or risk assignment.

✅ Income Mechanics:
You receive a credit that represents your max profit. The risk is capped, making it far more palatable for smaller accounts or tactical traders who want to limit potential losses.

📌 Trader’s Note: Bull put spreads don’t require margin accounts in some brokers when traded within defined risk. This opens the door to capital-efficient income in retirement accounts (IRAs).

Capital Efficiency: Where the Game Truly Changes

Let’s compare two setups on a $100 stock:

Observation:
CSPs offer greater nominal return. But bull put spreads deliver 10x the return per dollar at risk.

Philosophical Divide: Trader vs. Investor

Here’s the real distinction, CSPs are investing tactics, bull put spreads are trading strategies.

• CSPs say: “I want to own this stock, but I won’t overpay.”

• Bull put spreads say: “I want to profit if it doesn’t drop, but I’m out either way.”

This distinction isn’t academic, it defines your entire portfolio flow.

📘 Advanced Note: Many professional options traders never want assignment. They value liquidity and return on margin far more than equity accumulation. Meanwhile, investors seeking dividend payers or compounders love CSPs as a way to scale into positions.

Payoff and Risk: Defined vs. Undefined

One of the most important differences between cash-secured puts and bull put spreads is how they handle risk, and how much control you have over the worst-case scenario.

Let’s break it down.

🟢 Cash-Secured Puts: Simple but Open-Ended Risk

When you sell a cash-secured put, you're agreeing to buy 100 shares of a stock at a specific strike price. In exchange, you get paid a premium upfront.

If the stock stays above that strike by expiration, you keep the premium and walk away with a win. That’s the best-case scenario.

But what happens if the stock drops below your strike?

You’ll likely be assigned and obligated to buy 100 shares, regardless of how far the stock has fallen. This is what makes the risk undefined. There’s no built-in stop. If the company collapses or the market tanks, your losses can grow substantially, even though you started with a seemingly conservative trade.

There’s nothing mechanically stopping the downside, you must manually manage the risk by buying back the put or hedging the position.

This strategy works best when you’re confident in the stock’s quality and are comfortable owning shares at the strike price. It’s often used by longer-term investors who see assignment as an opportunity, not a problem.

🟢 Bull Put Spreads: Limited Profit, but Limited Risk Too

Now compare that to a bull put spread.

Here, you’re also selling a put, but you’re simultaneously buying a lower-strike put in the same expiration. That second leg creates a floor for your potential loss. No matter how far the stock falls, your risk is defined and capped at the distance between the strikes, minus the premium you collected.

You’re still betting that the stock will stay above your short strike, just like with a CSP, but if you're wrong, you know the worst-case outcome before you ever place the trade.

That makes bull put spreads ideal for traders who want more control, more precision, and less capital at stake. It’s a strategy built for repetition, not for acquiring stock.

🎯 Key Insight: Why This Difference Matters

Here’s the simplest way to think about it:

• If you're a long-term investor looking to enter stocks at a discount and you're fine with owning shares, cash-secured puts give you income plus a potential entry point.

• If you're a trader focused on short-term returns and want to avoid large drawdowns or margin surprises, bull put spreads offer a mechanical, risk-defined approach.

In other words:

Cash-secured puts let you play the role of a buyer, with some risk. Bull put spreads let you act like a lender, with guardrails.

For many, the choice isn’t about which is better, it’s about which fits the trade you’re trying to make right now.

Real-World Scenario

Let’s take AAPL, a widely traded equity:

• Current Price: $204

• You’re neutral-bullish and want income.

🔹 CSP Trade:

• Sell the $190 put for $2.75 with 45 DTE

• Set aside $19,000 - $275 = $18,725

• Max profit = $275

• Break-even = $187.25

• Return on Capital = 1.5%

🔹 Bull Put Spread Trade:

• Sell the $190 put, buy the $185 put

• Net credit = $0.80

• Max risk = $500 - $80 = $420

• Max profit = $80

• Break-even = $189.20

• Return on Capital = 19.0%

If APPL trades above $190, both win. But the CSP uses over 13x the capital for less than fraction the return.

💡 Pro Trader Tip: Use CSPs when you’re flush with cash and want equity exposure. Use spreads when you want return per dollar, not per ticker.

Strategic Trade-offs: When to Use Which

Psychological Profile: Know Thyself

A seasoned trader once said: “Cash-secured puts feel safer, but sometimes they lull you into thinking you're not in the trade at all.”

He’s right.

CSPs invite complacency. You may forget you’re short premium and end up with 500 shares of a crashing stock.

Bull put spreads, on the other hand, demand precision. They’re less forgiving, but they keep your attention sharp.

So ask yourself:

• Do I prefer loose flexibility or defined structure?

• Am I an accumulator or a tactician?

Your answer determines your strategy.

Final Thoughts: It’s Not Either/Or, It’s When and Why

CSPs and bull put spreads are like siblings, raised in the same house, different personalities.

• One is patient and wealth-building.

• The other is efficient and tactical.

The best traders know when to switch gears.
In high IV markets? Sell CSPs to earn outsized yield.
In choppy conditions or when managing tight capital? Bull put spreads rule.

📌 Advanced Strategy Layer: You can also ladder both. For example:

• Use CSPs in longer-dated expirations (30-60 DTE)

• Use bull put spreads in shorter windows (7-21 DTE) during IV spikes

Bonus: Pro Setup for Capital Rotation

If you run a $50K portfolio:

• Dedicate $15K to CSPs on stocks you’d love to own

• Rotate $5K in bull put spreads each week on liquid ETFs

• Keep $5K in cash for emergency hedges or VIX plays

That’s income, exposure, and control, all rolled into one machine.

Probabilities over predictions,

Andy Crowder

🎯 Ready to Elevate Your Options Trading?
Subscribe to The Option Premium—a free weekly newsletter delivering:
✅ Actionable strategies.
✅ Step-by-step trade breakdowns.
✅ Market insights for all conditions (bullish, bearish, or neutral).

📩 Get smarter, more confident trading insights delivered to your inbox every week.

📺 Follow Me on YouTube:
🎥 Explore in-depth tutorials, trade setups, and exclusive content to sharpen your skills.