A bull put spread is an options strategy used when the investor expects a moderate rise in the price of the underlying asset. This strategy is constructed by purchasing one put option with a lower exercise price while simultaneously selling another put option with a higher strike price. The goal of this strategy is realized when the price of the underlying stays above the higher strike price, which causes the short option to expire worthless, resulting in the trader keeping the premium. Note that buying a call with a higher strike price and selling a call with a lower strike price is a bear call spread that allows the investor to keep the net premium if stock prices fall. Buying a put with a high exercise price and selling a put with a low exercise price is an example of a bear put spread. Buying a put and selling a call will provide downside protection (due to the put), but the short call exposes the investor to unlimited risk if prices rise.

(Book 3, Module 40.2, LO 40.c)