What is the shape of a bull spread with puts?

A bull spread using put options is constructed by buying a put option at a higher strike price and selling a put option at a lower strike price, both with the same expiration date. This strategy is used when an investor expects the underlying asset's price to increase.

The key characteristic of the bull spread is that it has a limited risk and limited profit potential. Specifically, the maximum loss occurs when the underlying asset's price falls below the lower strike price, resulting in both options expiring worthless. Conversely, the maximum gain is achieved when the asset's price is above the higher strike price at expiration, capping the profit at the difference between the two strike prices minus the net premium paid.

As the market moves in favor of the investor’s expectations (i.e., the asset price rises), the value of the position increases until it reaches the maximum profit limit. This behavior leads to the graphical representation of a bull spread appearing as a straight upward line at the point where the underlying surpasses the higher strike price, reflecting steady profits. When the price is below the higher strike price, the line will remain horizontal, as no additional profit is generated beyond that point.

In conclusion, the upward line signifies the potential profits gained as the underlying price rises after exceeding the