Put Credit Spread

A put credit spread (also called a bull put spread or short put spread) involves selling a put option at a higher strike and buying a put at a lower strike, both with the same expiration. The trade collects a net credit upfront. Maximum profit occurs if the stock closes above the short (higher) strike at expiration, in which case both options expire worthless and you keep the entire credit. Maximum loss is the spread width minus the credit received.

This strategy is popular among income-oriented traders because it has a defined risk profile and a high probability of profit. By choosing strikes below the current stock price, you give the trade room to be wrong and still win. For example, selling a 10-delta put spread means the stock has roughly a 90% probability of staying above your short strike. The tradeoff is that when you lose, the loss is typically larger than the credit received.

Options Pilot's Sentiment pillar is particularly relevant for put credit spreads — if institutional flow is bearish, selling put spreads into that positioning can be risky. The Value pillar helps determine if the credit received is adequate compensation for the risk, and the Liquidity pillar ensures tight spreads for clean execution on both legs.