Debit Spreads

A vertical debit spread is an option strategy that involves buying one strike (call or put) while simultaneously selling another strike (in the same expiration). The strategy requires paying a net debit.

An easy way to think about a vertical debit spread is by selling a more out of the money call or put (to someone even more bullish or bearish) versus the long call or put, the trader betters their breakeven, and establishes a profitability range between two points, the breakeven and the short strike.

For example with stock XYZ trading 100:

Debit call spread – A trader buys a 100 strike call for $5.00 and sells a 105 call at $3.00 for a net debit of $2.00. The resulting position would be risking $2.00, to make up to $3.00. The breakeven fn the trade is $102 (100 strike + 2.00). The trade has a max gain if the stock is above $105 on expiration, and a max loss if the stock expires below $100.

Debit Put Spread – A trader buys the 100 put for $5.00 and sells the 95 put at 3.00. They risk $2.00 for a $3.00 potential reward in a $5 wide spread. Max gain is if the stock is below 95 on expiration, max loss above 100 and a breakeven on the trade at 98 (100 strike – $2.00) with profits below.

A comparison of a call, versus a debit call spread, note the lower breakeven for the spread:

Debit call spread
Outright call

Free From Options AI

Options AI Tools Home

Expected moves, unusual options activity, earnings data, stock scanner and much more! Yours FREE from Options AI.

Earnings Calendar with Expected Moves

See expected earnings moves to help decide whether to trade or fade the move.

Compare Expected Moves

Skip the chains and compare expected moves across multiple stocks.

Options University

Quickly advance your understanding of income and debit spreads with our short video series. 


Open an account

Learn more about Options AI and apply for an account.

Learn More

Stay in the loop

Be the first to hear product announcements and get daily market content from The Orbit.

WordPress Lightbox