How do you lose money on a bull put spread?

The bull put spread strategy is specifically tailored to capitalize on an anticipated rise in a stock's price. This approach involves strategic positioning of put options, which are financial instruments that give the holder the right, but not the obligation, to sell an underlying asset at a predetermined price (strike price) before a specified date.

When the stock's market price surpasses the strike price at expiration, the put option essentially becomes obsolete, as there is no incentive for anyone to purchase the stock at a price lower than its current market value. Consequently, the put option expires without being exercised, rendering it valueless.

For the investor who has initiated the bull put spread by purchasing the put option, this scenario translates into a financial loss. Specifically, the investor forfeits the premium they had initially paid to acquire the put option, which represents the cost of executing the strategy.

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