Let's consider the following example:

Figure: Bull Put Spread Vs. Stock Buying Example

The table below summarizes the results at expiration.

Figure: Bull Put Spread Vs. Stock Buying Example – Results at Expiration

As Figure below illustrates, the ‘bullish spread’ strategies have a clear advantage over the ‘buy stock ’strategy in terms of profit potential. Depending on the strike (the more ’bullish’ the strategy, the larger its maximum profitability), “bullish spread’ strategies can be several times more profitable than a simple ‘buy stock’ strategy. The special feature of a ‘bullish spread’ strategy is its sensitivity around the break-even point. Slight changes in the stock price around the break-even figure cause significant changes in the profitability of ‘bullish spread’ strategies. The more bullish your strategy is, the more sensitive it is around the break-even point.

Figure: Bull Put Spread Vs. Stock Buying Example – Profit Potential

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