Bull Put Spreads benefit when the price of the Underlying rises because the Short Put Option reduces in value. Even if the price of the Underlying does not rise, providing the Strike Price of the Short option is below the market price then it expires worthless and the Option Writer keeps all the Premium taken in when the put was sold. For this reason, Bull Put Spreads are sometimes referred to as having slightly non-directional characteristics.
A Bull put Credit Spread is the inverse or opposite strategy to a Bear Call Spread but shares some characteristics with it. Bull Put Spread benefits from declining Volatility and time decay (Theta) is positive for Bull put Spreads.
See the Profit & Loss diagram of the Bull Put Spread Spread strategy at OptionCreator
XYZ is currently trading at $200
Short 1 x Out Of The Money $190 Strike Put for 4.14 = $414 credit
Long 1 x Out Of The Money $180 Strike Put for 1.66 = ($166) debit
Net credit received = $248
All options expire with XYZ still trading above $190
Short 1 x $190 Strike Put is worthless = ($0)
Long 1 x $180 Strike Put is worthless = ($0)
The trader keeps the $248 credit received. This is the total amount of profit available, irrespective of whether the price had risen any higher.
Options expire with XYZ trading at $180
Short 1 x $190 Strike Put is now worth 10 = ($1000) debit
Long 1 x $180 Strike Put is now worth 0 = $0credit
The trader incurs a loss of $1000 which is offset by the credit received of $248 to reduce the liability to (-$752). This is the total amount the trader can lose.
External LinksBull Put Spread (Credit Put Spread)
OIC article explaining bull put spreads.Bull Put Spread
Options Guide article on bull put spreads, includes an example and describes related trades.