In crypto markets, being bullish does not necessarily mean expecting explosive upside. Most of the time, the more realistic assumption is that price will hold above a certain level. Bull put spreads are designed precisely for that environment.
At Terramatris, we use bull put spreads as a structured, probability-driven way to generate income while keeping downside risk explicitly defined. This is not about prediction; it is about positioning.
What Is a Bull Put Spread?
A bull put spread is an options strategy that involves selling one put option and buying another put option at a lower strike price, both with the same expiration. The trade is entered for a net credit, meaning premium is received upfront.
The logic is straightforward: as long as the underlying asset remains above the higher strike at expiration, the position expires worthless and the premium is kept. If price falls, losses are limited by the long put, which caps downside risk.
This structure turns a moderately bullish or neutral market view into a measurable risk-reward profile.
Why Bull Put Spreads Work in Crypto Markets
Crypto markets are volatile, but they are also highly cyclical and frequently range-bound. Long stretches of sideways price action are common, especially after large moves. Bull put spreads benefit from this environment because they do not require upside continuation. They only require price to stay above a predefined level.
Another key factor is implied volatility. Crypto options often price in extreme outcomes. When fear is elevated, put premiums expand. Selling that volatility — while hedging downside through a spread — allows us to convert uncertainty into income rather than directional exposure.
Time decay also works in our favor. As expiration approaches, option value erodes, provided price remains above the short strike.
Risk and Payoff Characteristics
Bull put spreads have a clearly defined maximum profit and maximum loss. The maximum profit is the premium received when the position is opened. The maximum loss is the difference between the two strike prices, minus that premium.
There are no hidden tail risks and no unlimited downside. This matters in crypto, where sudden moves and liquidity gaps can destroy poorly structured positions.
Breakeven is known from the start. The trade either works within its defined boundaries or it does not.
How Terramatris Uses Bull Put Spreads
At Terramatris, bull put spreads are not used as isolated trades or aggressive yield plays. They are deployed as part of a broader capital management framework.
We focus on strike selection far enough below current price to allow for normal volatility without stress. These levels are typically aligned with prior support zones, volatility compression areas, or regions where downside momentum historically slows.
Position sizing is conservative by design. The goal is repeatability, not optimization of single-trade returns. We prefer smaller, consistent credits over oversized exposure that only works in ideal conditions.
Bull put spreads are also selected based on market context. Elevated implied volatility, pessimistic sentiment, and post-selloff stabilization are preferred entry environments. In other words, we sell fear when it is already priced in.
What Bull Put Spreads Are Not
Bull put spreads are not passive income instruments. They require monitoring, especially in fast-moving markets. They also require discipline in closing, rolling, or reducing exposure when assumptions change.
They are not suitable for excessive leverage and they are not immune to losses. Their advantage lies in structure, not certainty.
Constructing effective bull put spreads in crypto requires more than picking random strikes. Liquidity, volatility skew, expiration timing, and margin behavior all matter.
That is why we publish a weekly crypto options newsletter, where we share bull put spread setups along with the reasoning behind them. This includes strike selection logic, expiration choice, and risk considerations — not just trade ideas.