Put Bull Spread

Components

Long one put option and short another put option with a higher strike price.

Risk / Reward

Maximum Loss: Limited to the difference between the two strike prices minus the net premium received for the position.

Maximum Gain: Limited to the net credit received for the spread. I.e. the premium receieved for the short option less the premium paid for the long option.

Characteristics

When to use: When you are bullish on market direction.

A Put Bull Spread has the same payoff as the "Call Bull Spread" except the contracts used are put options instead of call options. Even though bullish, a trader may decide to place a put spread instead of a call spread because the risk/reward profile may be more favourable. This may be the if the ITM call options have a higher implied volatility than the OTM put options. In this case, a call spread would be more expensive to initiate and hence the trader might prefer the lower cost option of a put spread.