Bull Put Spreads and Bear Call Spreads: The Vertical Spread Playbook

A vertical spread uses two options of the same type (both calls or both puts) with the same expiration but different strike prices. When you sell the more expensive option and buy a cheaper one for protection, you create a credit spread — collecting premium upfront with defined risk.

Bull Put Spread

A bull put spread sells a put at a higher strike and buys a put at a lower strike. It profits when the underlying stays above the short put strike. This is a bullish-to-neutral strategy that collects premium from time decay and directional bias. At QuantaEdge, we use bull put spreads (CSP_SPY strategy) as a standalone income strategy on SPY.

Bear Call Spread

A bear call spread sells a call at a lower strike and buys a call at a higher strike. It profits when the underlying stays below the short call strike. This is a bearish-to-neutral strategy. It's the upper half of an iron condor, deployed independently when the regime engine signals directional downside bias.

When to Choose Spreads Over Iron Condors

Iron condors assume range-bound behavior. When the regime engine detects a mild directional trend, vertical spreads deployed on the opposite side capture premium with the trend acting as a tailwind. In a trending-up regime, bull put spreads collect premium below the market with low probability of breach.

Risk Management

The maximum loss on a vertical spread is the width minus the credit received. Our position sizing ensures no single spread risks more than 1-2% of portfolio value. Exit rules mirror iron condors: 50% profit target, 200% stop loss, and 7 DTE time exit.