Bull Put Spread: Option Pay-Off Diagram

Posted on March 12th, 2010 admin

It is essential to understand the option pay-off diagram for the option strategy you are trading. It allows you to know to determine at what share price you achieve maximum profit, maximum loss and breakeven level at expiry. The bull put spread is made up of a sold put and a bought put at a lower strike. When combined it creates a bear put spread. See below for how the bull put spread option pay-off diagram is constructed. The dotted green line is the sold put and the dashed green line represents the bought put.

Bought Put


Sold Put


Bull Put Spread


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