1. What it is
Sell the higher-strike put and buy the lower-strike put at the same expiration and quantity.
2. Why use it
Collect premium for a price floor view, with a lower put limiting the loss.
3. How the numbers work
View example
- Sell 1 × Put · Strike 100
- Buy 1 × Put · Strike 95
All option legs have the same expiration.
- Option premium received
- 2
- Expiration breakeven
- 98
- Maximum expiration profit
- 2
- Maximum expiration loss
- 3
- Underlying at expiration 100 → Profit 2
- Underlying at expiration 110 → Profit 2
4. How it changes
Net delta is positive. Near the short put, positive theta and negative gamma often dominate, but Greek signs change across the price range.
5. What to watch for
Maximum expiration loss is strike width minus credit. The credit is the maximum profit, not the amount at risk.
A high probability of retaining a small credit can coexist with a much larger loss. Check both outcome size and assignment obligations.
Examples use illustrative entry prices and amounts per underlying unit, before costs. Contract amounts require the contract multiplier. Expiration payoffs assume the illustrated legs remain intact; earlier position values and exercise or assignment outcomes can differ.