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Bull Put Spread

You are not calling for a rally. You are just saying: BTC is not going below 88k in the next two weeks. That is it. That is the whole thesis. The bull put spread lets you get paid for that opinion. Sell a put, buy a cheaper put below it for protection, pocket the difference. If you are right (if BTC stays above your short strike) you keep the credit and walk away. This is a credit spread.

Credit spreads are psychologically addictive. You win 7 out of 10 trades. Then trade 8 wipes out all seven wins. The math works long-term only if you size for the loss, not the win.

What You Do​

The SetupYou receive premium
Sell1 put at the higher strike (K2)
Buy1 put at the lower strike (K1), same expiry
Max Profit
Net credit
Max Loss
Width - credit
Breakeven
K2 - net credit
Margin
Width - credit (venue-specific)

How the P&L Works​

  1. Above K2 (short strike). Both puts expire worthless. You keep the full credit. This is the outcome you want and the outcome that happens most often.
  2. Between K1 and K2. The short put is ITM and losing money. The credit you collected provides a cushion, but it is eroding.
  3. Below K1. Both puts ITM. Max loss reached. The long put stops the bleeding. Without it, you would be naked short a put and staring at very large downside (bounded by the underlying going to zero).

Worked Example: BTC 82k/88k Bull Put Spread​

BTC at 93,400. 14 DTE. IV at 62%.

Sell 88k put at 1,950. Buy 82k put at 680. Net credit: 1,270. Width: 6,000.

BTC at Expiry
Short $88k Put
Long $82k Put
P&L
$93,000
$0
$0
+$1,270
$88,000
$0
$0
+$1,270
$86,730
-$1,270
$0
$0
$85,000
-$3,000
$0
-$1,730
At or below $82,000
-$6,000+
offsets
-$4,730

Max profit: 1,270 (the credit). Max loss: 4,730 (width 6k minus credit). Risk/reward: 0.27:1. Breakeven: 86,730.

BTC needs to drop 7.1% from 93,400 before you start losing money. That is a lot of room. The probability of profit on this trade is roughly 75%. The catch: when you lose, you lose 4,730 to make 1,270. That is 3.7x your max win. One loss erases almost four wins.

Explore the Payoff​

Spot at Expiry$100k
$70k$130k
Net Credit$4k
$1k$9k
BE $96k$0+$4k-$6k$70kK1 $90kK2 $100k$130kSpot Price at ExpiryP&L
Settlement
$100k
P&L
+4.0k
Max Loss
-$6k
Max Gain
+$4k

When to Use​

  • Bullish or neutral. You do not need BTC to rally. You just need it to not collapse. The bar is lower than a debit spread.
  • You want to collect premium upfront rather than pay a debit. Cash in the account on day one.
  • IV is elevated. High IV means fatter credits for the same strikes. You are selling expensive fear. If IV drops after entry, both legs deflate and since you are net short, that deflation is profit.
  • You want a high probability of profit trade. Selling OTM puts with a 25-delta short strike gives you roughly a 75% chance of full profit.
💡

A bull put spread with a 30-delta short strike wins about 70% of the time. That sounds great until you run the numbers. If max profit is 1,270 and max loss is 4,730: seven wins = 8,890, three losses = 14,190. You are underwater. The strategy only works if you manage losers aggressively, closing at 2x the credit received, not at max loss.

Greeks at a Glance​

Greek
Sign
What It Means
Delta
+
Benefits from BTC rising or staying flat. You want spot to drift away from your short strike.
Gamma
-
The enemy. As BTC drops toward your short strike, delta moves against you and accelerates. Negative gamma means the trade gets worse faster.
Theta
+
Your best friend. Every day that passes with BTC above K2, both puts lose value. Since you sold the more expensive one, net decay flows to you.
Vega
-
Rising IV hurts. If the market panics after entry, your short put swells in value. This is the "picking up nickels" risk.
Common Mistakes
The mistakeSelling credit spreads right before a known catalyst -- FOMC, CPI print, protocol upgrade, token unlock. "IV is high so the credit is fat!" Yes, and IV is high for a reason.
The realityHigh IV before a catalyst is not free money. It is the market pricing in a move. If the move happens, your short strike gets tested and negative gamma crushes you exactly when you can least afford it. Sell premium AFTER the catalyst when IV is collapsing, not before.
The mistakeSizing based on the credit received instead of the max loss. "I only risked $1,270" -- no, you risked $4,730.
The realityYour position size should be based on the max loss ($4,730 in the example), not the credit. If losing $4,730 per contract hurts your account, the trade is too big regardless of how likely the win is.
The mistakeNever closing losers early. "It might come back." Maybe. But the math says cutting at 2x the credit received is better than hoping for a miracle.
The realityA mechanical stop -- close if the spread reaches 2x the credit received -- turns a -$4,730 max loss into roughly a -$2,540 realized loss. Over 100 trades, that one rule changes the strategy from negative EV to positive EV.

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