How to Calculate Max Loss and Max Profit on a Credit Spread

A credit spread is a defined-risk options strategy where you sell one option and buy a further out-of-the-money option of the same type and expiration, collecting a net credit for the difference. Because both max profit and max loss are capped, the math is straightforward once you know the formulas — but the breakeven direction flips depending on whether you’re trading a put spread or a call spread, which trips up a lot of newer traders. This guide covers both.

For strategy background, see credit spread vs. debit spread or the options glossary. To skip the manual math entirely, use the options profit calculator.

Two Types of Credit Spreads

Bull put spread (put credit spread): You sell a put at a higher strike and buy a put at a lower strike. You’re betting the stock stays above the short strike, and you profit as long as it does — hence “bull.”

Bear call spread (call credit spread): You sell a call at a lower strike and buy a call at a higher strike. You’re betting the stock stays below the short strike — hence “bear.”

Both are net-credit trades: you receive more premium for the option you sell than you pay for the option you buy.

The Formulas

Width

Width = |long strike − short strike|

This is simply the distance between your two strikes, expressed in dollars per share.

Max Profit

Max profit = net credit × 100 × number of contracts

The most you can make on either type of credit spread is the credit you collected up front. If the stock finishes on the favorable side of your short strike at expiration, both legs expire worthless and you keep the full credit.

Max Loss

Max loss = (width − net credit) × 100 × number of contracts

Your long option caps the loss on the short option. The worst case is the width of the spread (the maximum the short option could be in the money) minus the credit you already banked, which offsets part of that loss.

Breakeven

This is where the sign matters, and it depends on which type of spread you’re trading:

• Bull put spread breakeven = short strike − net credit
• Bear call spread breakeven = short strike + net credit

Why the difference? A put credit spread profits when the stock stays above the short put strike, so the danger zone is below it — the credit gives you a cushion, moving the breakeven down from the short strike. A call credit spread profits when the stock stays below the short call strike, so the danger zone is above it — the credit gives you a cushion, moving the breakeven up from the short strike. In both cases, the credit moves the breakeven in the direction that gives you more room before the trade turns unprofitable.

Worked Example: Bull Put Spread

Suppose a stock is trading around $100, and you sell a put credit spread with these strikes:

• Sell the $95 put
• Buy the $90 put
• Net credit received: $1.20 per share

Step 1: Calculate width. Width = $95 − $90 = $5

Step 2: Calculate max profit. Max profit = $1.20 × 100 × 1 contract = $120

Step 3: Calculate max loss. Max loss = ($5 − $1.20) × 100 × 1 contract = $3.80 × 100 = $380

Step 4: Calculate breakeven. Breakeven = $95 − $1.20 = $93.80

As long as the stock finishes at or above $93.80 at expiration, you either keep the full credit (above $95) or a partial profit (between $93.80 and $95). Below $93.80, the trade is at a loss, capped at $380.

Worked Example: Bear Call Spread

Now suppose the same stock, still around $100, and you instead sell a call credit spread:

• Sell the $105 call
• Buy the $110 call
• Net credit received: $1.10 per share

Step 1: Calculate width. Width = $110 − $105 = $5

Step 2: Calculate max profit. Max profit = $1.10 × 100 × 1 contract = $110

Step 3: Calculate max loss. Max loss = ($5 − $1.10) × 100 × 1 contract = $3.90 × 100 = $390

Step 4: Calculate breakeven. Breakeven = $105 + $1.10 = $106.10

As long as the stock finishes at or below $106.10, you either keep the full credit (below $105) or a partial profit (between $105 and $106.10). Above $106.10, the trade is at a loss, capped at $390.

A Note on Risk/Reward Ratios

Notice that in both examples above, the max loss is meaningfully larger than the max profit — that’s typical for credit spreads sold closer to the current stock price. The narrower the width relative to the credit, or the further out-of-the-money the short strike, the better your risk/reward ratio tends to look, though usually at the cost of a lower probability of collecting the full credit. There’s no free lunch: wider spreads and closer-to-the-money short strikes generally offer larger credits but proportionally larger max losses too.

Frequently Asked Questions

How do you calculate max loss on a credit spread? Subtract the net credit received from the width of the spread (the difference between your two strikes), then multiply by 100 and the number of contracts: max loss = (width − net credit) × 100 × contracts.

Does the breakeven formula differ between put and call credit spreads? Yes. For a bull put spread, breakeven = short strike − net credit. For a bear call spread, breakeven = short strike + net credit. The credit always shifts the breakeven away from the strikes in the direction that favors the seller.

What’s the maximum profit on a credit spread? The maximum profit is simply the net credit received, multiplied by 100 and the number of contracts. You realize this full amount if the stock finishes beyond your short strike, on the favorable side, at expiration.

Can I lose more than my max loss on a credit spread? No. Because the long option in the spread caps your risk, your loss is limited to (width − net credit) × 100 × contracts, regardless of how far the stock moves against you — this is what distinguishes a credit spread from selling a naked put or call.