Australian investors have more tools than ever to manage risk and boost returns—even when the share market isn’t surging. Among these, the bull put spread is gaining traction as a smart, income-focused strategy, especially in 2025’s uncertain but resilient ASX landscape. If you want to profit from shares staying steady or moving up (without the wild risks of naked options), it’s time to add this strategy to your arsenal.
What Is a Bull Put Spread?
The bull put spread—sometimes called a put credit spread—involves selling one put option while simultaneously buying another put option at a lower strike price on the same stock and expiry date. Here’s how it works for an Aussie investor:
- Sell a put option at a higher strike price (collecting a premium)
- Buy a put option at a lower strike price (paying a smaller premium)
- The result: you pocket the net premium upfront, with risk capped by the lower strike put.
This approach generates income as long as the share price stays above the higher strike price. If the stock falls below your breakeven point, your losses are limited by the bought put—unlike with a naked put sale, where losses can be much larger.
Why Bull Put Spreads Are Gaining Popularity in Australia
With the ASX 200 projected to remain range-bound in 2025 after a choppy 2024, many investors are searching for ways to generate income without exposing themselves to sharp market falls. The bull put spread fits the bill for several reasons:
- Income generation: Investors collect a net premium upfront, which can be significant in periods of higher volatility (as seen in early 2025).
- Limited risk: The bought put acts as insurance, capping maximum losses at the difference between the strike prices, minus the net premium received.
- Flexibility: Ideal for shares or ETFs you’re happy to own at a lower price, or for profiting when you expect markets to stay flat or rise modestly.
For example, suppose you’re bullish on BHP, currently trading at $45. You might:
- Sell a BHP $44 put for $0.80
- Buy a BHP $42 put for $0.30
- Net premium received: $0.50 per share (or $50 per contract, since each options contract covers 100 shares)
If BHP stays above $44 at expiry, you keep the premium. If it falls below $42, your maximum loss is capped at $1.50 per share ($2 difference between strikes, minus $0.50 premium).
Key Risks, Taxation, and 2025 Policy Updates
While the bull put spread offers a more measured risk profile than many options strategies, it’s not without pitfalls. Here’s what you need to know in 2025:
- Assignment risk: If the share price falls below the sold put’s strike, you may be assigned and required to buy the stock. In Australia, this is typically handled as a cash settlement.
- Taxation: Options premiums are treated as capital gains or losses. The ATO’s latest 2025 guidelines emphasise accurate record-keeping for all options trades, as mismatches in reporting can trigger audits.
- Liquidity and margin: Not all ASX stocks have liquid options markets. In 2025, ASX-listed ETFs like STW and IOZ have seen growing options interest, providing more choices for spread traders. However, ensure your broker offers reasonable margin requirements and low commissions, as spreads can eat into profits.
- Regulatory changes: ASIC’s 2025 review of options education and risk disclosure means brokers are now required to offer more robust training and clear warnings for retail investors using spread strategies.
When Does a Bull Put Spread Make Sense?
The strategy shines in specific market conditions:
- You expect moderate gains or sideways movement in a share or ETF
- You want to generate income with a built-in safety net against sharp declines
- You’re comfortable with the possibility of being assigned and owning the underlying stock
It’s also popular for investors who want to steadily grow wealth without the stress of big swings or the complexity of more exotic options plays.
Getting Started: Best Practices for 2025
- Focus on liquid ASX stocks or ETFs with tight bid-ask spreads
- Use shorter expiries (1–2 months) to maximise time decay benefits
- Set strike prices with a comfortable margin below the current share price, especially during volatile periods
- Review broker platforms for updated options tools and ASIC-mandated education modules
Platforms like CommSec, SelfWealth, and Interactive Brokers have enhanced their options analytics and training offerings in line with 2025 regulations—making it easier for retail investors to model trades and understand risk before entering a spread.
