###### Bull Put Credit Spread Profit Loss Chart This bull put credit spreads strategy is to realize a profit by making cash that is a net credit formed by the difference in a SOLD PUT price and a BOUGHT PUT price. While the stock goes up, the investor keeps the net credit (difference in premiums).
 SELL a PUT at or near money (higher strike price). BUY a PUT one or more strikes below #1 PUT in the same month, this provides the downside safety. The margin requirement is the difference between the strike prices, usually 5 points/dollars. The maximum risk is the difference between the strike prices, less the net credit (difference in premiums). The maximum profit is the net credit (difference in premiums). The break even point is the higher strike price (#1) minus the net credit. Profit is realized when the stock price rises above this number. Maximum profit is made when the stock price rises above the higher strike price (#1 PUT). An investor wants both options to expire worthless so they will retain the entire net credit.
##### The return calculations for the Bull Put Credit Spreads Strategy are:
% Return = (Premium on SOLD PUT - Premium on BOUGHT PUT) / (Margin - Net Credit)
% Return = (Net Credit) / (Margin - Net Credit)
##### Where...
Margin = SOLD PUT strike price - BOUGHT PUT strike price
Net Credit = Premium on SOLD PUT - Premium on BOUGHT PUT
Example: Stock XYZ at \$94.90 per share.
Write (Sell) the SEP 90 PUT for \$1.35
Buy the SEP 85 PUT for \$0.60
% Return = (Premium on SOLD PUT - Premium on BOUGHT PUT) / (Margin - Net Credit)
% Return = (1.35 - 0.60) / ((90 - 85) - (1.35 - 0.60)) = 17.6% if stock is > \$90
Max. Risk = Margin - Net Credit = \$5 - \$0.75 = \$4.25, if stock is < \$85
Max. Profit = Net Credit = \$0.75, if stock is > \$90
Break Even = Higher Strike - Net Credit = \$90 - \$0.75 = \$89.25