Credit Spread

Credit Spread vs Debit Spread: When to Use Each Both credit spreads and debit spreads are vertical spreads — you buy one option and sell another option of the same type (both calls or both puts) on the same underlying, with the same expiration but different strikes. The strategies look almost identical on paper. The difference that actually matters comes down to one question: do you collect cash when you open the trade, or do you pay it? ...

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. ...