The rules at a glance
- Bull put spread: sell a put below the market and buy a further put below it; profits if the Nifty stays above the sold strike
- Bear call spread: sell a call above the market and buy a further call above it; profits if the Nifty stays below the sold strike
- Maximum profit and loss: profit is the net premium; loss is the distance between the strikes minus the premium
- When: bull put when your view is up or sideways, bear call when it's down or sideways
- Exit: take profit at about half the maximum, or close if the Nifty reaches the sold strike
How a credit spread works
Selling a naked put can earn a premium, but if the Nifty falls hard the loss can run to many times the premium. Buying a cheaper put further below puts a floor under it. The difference between the two premiums is your credit, the most you can make. The distance between the two strikes, minus that credit, is the most you can lose. You've traded some premium for certainty about the worst case, and for a much smaller margin.
Bull put spread: neutral to bullish
Profit or loss at expiry
| Leg | Strike | Premium | For one lot of 65 |
|---|---|---|---|
| Sell | 24,800 PE | 66.05 | 4,293.25 |
| Buy | 24,600 PE | 25.55 | 1,660.75 |
| Bull put spread, 1 lot | |
|---|---|
| Net premium | ₹2,633 received |
| Maximum profit at expiry | ₹2,633 |
| Maximum loss at expiry | ₹10,368 |
| Breakeven at expiry | 24,759.50 |
| If the Nifty is unchanged or higher | ₹2,633 |
| If the Nifty falls 2% to 24,500 | −₹10,368 |
You keep the 40.50-point credit if the Nifty finishes above 24,800. Below 24,600 the loss stops growing at 200 − 40.50 = 159.50 points, ₹10,368 a lot. The breakeven is the sold strike minus the credit: 24,759.50.
Bear call spread: neutral to bearish
Profit or loss at expiry
| Leg | Strike | Premium | For one lot of 65 |
|---|---|---|---|
| Sell | 25,200 CE | 82.00 | 5,330.00 |
| Buy | 25,400 CE | 34.35 | 2,232.75 |
| Bear call spread, 1 lot | |
|---|---|
| Net premium | ₹3,097 received |
| Maximum profit at expiry | ₹3,097 |
| Maximum loss at expiry | ₹9,903 |
| Breakeven at expiry | 25,247.65 |
| If the Nifty is unchanged or lower | ₹3,097 |
| If the Nifty rises 2% to 25,500 | −₹9,903 |
The mirror image: keep the 47.65-point credit if the Nifty finishes below 25,200, lose at most 152.35 points above 25,400. The breakeven is the sold strike plus the credit: 25,247.65.
Credit spreads compared
| Bull put spread | Bear call spread | Debit spreads (for comparison) | |
|---|---|---|---|
| Your view | Up or sideways | Down or sideways | A move in one direction |
| Premium | Received | Received | Paid |
| Time decay | Helps you | Helps you | Usually works against you |
| Maximum loss | Strike gap − credit | Strike gap − credit | The premium paid |
Put a bull put spread and a bear call spread together on the same expiry and you have an iron condor. The payoff calculator also has the debit versions, the bull call and bear put spreads, for when you want to pay for a directional move instead.
Choosing the strikes
- The sold strike sets how often you win. Further from the Nifty is safer and pays less.
- The gap between strikes sets the maximum loss. A 200-point gap, as here, keeps it to about ₹10,368 a lot; a 100-point gap halves the risk and the credit roughly with it.
- Your view. A bull put spread below the market suits a trend that's up or a market that's holding a support level; the previous day's low or a clear swing low is a common reference. A bear call spread suits the reverse.
The rules, step by step
- Decide which big move you don't expect. Sell puts only if a big fall is unlikely in your view, calls only if a big rise is.
- Enter both legs together. A spread order, or the bought leg first, so you're never naked.
- Size from the maximum loss. With a fixed worst case, sizing is simple: maximum loss per lot × lots ≤ what you're willing to lose on one trade.
- Take profit at about half the credit, and close if the Nifty reaches the sold strike.
Margin and costs
Hedged spreads need much less margin than naked short options, and the exact figure is in your broker's margin calculator. Each spread is two orders to open and two to close, each with brokerage and exchange charges, plus STT of 0.15% on the premium of the option you sell.
How to test it before you trade it
TradingView's Strategy Tester works on one chart at a time, so it can't test a multi-leg option strategy that sells new strikes every week. Testing an option strategy works differently from the chart strategies on this site.
- Check the shape with today's prices. Put the live premiums into the payoff calculator and note the breakevens, the maximum loss and the result if the Nifty moves 2% or 4%.
- Check the margin. Use your broker's margin calculator for the whole position. Hedged positions need much less than naked ones.
- Backtest on past option prices. Some Indian platforms, such as AlgoTest, let you test option strategies on historical Nifty option data. Include costs and slippage.
- Paper trade it first. Paper trade both kinds for a couple of months, and note whether your view of the direction or the exits did more of the work.
- Keep a journal. Write down the entry, the exit, the reason and the result for every trade. A trading journal shows quickly whether your exits follow your rules.
With one trade per weekly expiry, 100 trades take about two years. Judge a selling strategy on a long sample: it can win for months and then give much of it back in one bad week.
Try it in the payoff calculator, and get the PDF
Open the bull put spread in the free payoff calculator with these legs filled in, then type in today's premiums from your option chain to see the real breakevens and maximum loss. The PDF is a one-page cheat sheet with the rules, the payoff diagram and a checklist.
Nifty options and the rules in India
Nifty options trade on NSE and are legal for residents through a SEBI-registered broker. SEBI tightened the rules for index derivatives in stages: from 20 November 2024, weekly options on only one benchmark index per exchange, a minimum contract value of ₹15 lakh and an extra 2% extreme loss margin on short options on expiry day; from 1 February 2025, option premiums collected upfront. Since 1 April 2026, STT on options sold is 0.15% of the premium. Check your broker's current margin and charges before you trade.
The odds are worth knowing. SEBI found that 93% of individual traders in equity futures and options lost money over FY22 to FY24, and 91% did in FY25. Nothing on this page is advice about what the Nifty will do; it explains how the strategy works and what it risks.
Related strategies: Nifty option selling, short strangle, straddle, iron condor, opening range breakout, VWAP pullback. Build any of them in the payoff calculator. All 34 strategies are compared on one page on the trading strategies page.