Vertical spreads (debit and credit)

8 minute read · By Krishna Avadhani, Vestora Academy · Updated 18 October 2026

A vertical spread buys one option and sells another of the same type and expiry at a different strike. A bull call spread buys a lower-strike call and sells a higher-strike call: cheaper than a call alone, with capped profit. A bear put spread does the same with puts for a falling view.

These are debit spreads: you pay up front, and that payment is the maximum loss. They pass the Vestora safety rule.

Credit spreads (such as a bull put spread) receive money up front but require margin; the maximum loss is the strike width minus the credit and is usually larger than the maximum gain. They have defined risk but a poor reward-to-risk ratio, so size them carefully.

Key takeaways

Debit spreads: pay up front, max loss = debit.
Selling the second option cheapens the trade but caps profit.
Credit spreads have defined but often larger risk than reward.

Check your understanding

1. Bull call spread: buy $50 call for $3, sell $55 call for $1. Max loss and max gain?

$2 and $3
$3 and $5
$2 and $5
$1 and $4

Show the answer

$2 and $3. Net debit $2 = max loss. Max gain = 5 width - 2 = $3.

2. Which spread passes the Vestora safety rule?

Naked put
Bear put debit spread
Short straddle
Naked call

Show the answer

Bear put debit spread. A debit spread's maximum loss is the amount paid.

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General education only, not financial advice. Examples are illustrations. Rules, tax settings and products change; check official sources.