Diagonal Bull Put Spread
Also known as: Poor Man's Covered Put
Bullish or neutral with a desire to sell puts for income while using a longer-dated put to hedge unexpected downside risk — a structured version of the cash-secured put
Risk Profile at a Glance
How to Construct the Diagonal Bull Put Spread
- 1.Buy 1 longer-dated put at a higher strike (as a hedge anchor)
- 2.Sell 1 near-term put at a lower strike
- 3.Different strikes AND different expirations
- 4.Net debit
Understanding the Diagonal Bull Put Spread
The diagonal bull put spread takes the cash-secured put concept and adds a longer-dated protective put to limit downside risk. You sell a near-term put to collect premium while the back-month put acts as a safety net if the stock drops sharply. This structure is bullish in nature: you want the stock to stay above the short put strike so you keep the premium. The back-month put costs money but dramatically reduces the capital requirement compared to a fully cash-secured position.
This is sometimes called the poor man's covered put because the long put replaces cash collateral. The strategy is most effective in high implied volatility environments where near-term put premium is rich. Rolling the short put to new strikes each month creates an ongoing income stream. The EdgeOS bull count 1–2 with the stock holding above a key support (lower ATR trigger) is the ideal entry context..
When to Use It — EdgeOS Signal Integration
- ✓Ideal when SCTR > 9 and EdgeOS bull count = 1 (fresh ignition trigger)
- ✓Extension score below 0.8 (Tight or Mod) — stock has room to run
- ✓Confirmed or fluid bullish trend — EMA alignment supports the direction
Compare with Similar Strategies
Other Diagonal Spreads Strategies
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Frequently Asked Questions
What is the Diagonal Bull Put Spread options strategy?
The diagonal bull put spread takes the cash-secured put concept and adds a longer-dated protective put to limit downside risk. You sell a near-term put to collect premium while the back-month put acts as a safety net if the stock drops sharply.
When should I use the Diagonal Bull Put Spread?
Bullish or neutral with a desire to sell puts for income while using a longer-dated put to hedge unexpected downside risk — a structured version of the cash-secured put
What is the maximum loss on the Diagonal Bull Put Spread?
The maximum loss is fully defined at entry: the net debit paid (for debit strategies) or the spread width minus the credit received (for credit spreads). You can never lose more than this amount.
How does the Diagonal Bull Put Spread compare to similar strategies?
The Diagonal Bull Put Spread is a bullish complex strategy. Compared to the Short Naked Put (bullish, credit), the Diagonal Bull Put Spread has limited max risk and limited max reward. Your choice depends on your directional bias, IV environment, and risk tolerance. The TraderValue strategy comparison tool lets you see the exact payoff differences side by side.