Vertical Spread
An options strategy involving the simultaneous buy and sell of two options of the same type and expiration but at different strikes, limiting both risk and reward.
Formula
Max Profit (debit) = Spread Width − Debit Paid | Max Loss (debit) = Debit Paid
A vertical spread uses two options of the same type (both calls or both puts) at the same expiry but different strikes. The spread is either a debit spread (you pay net premium, want the underlying to move) or a credit spread (you collect net premium, want it to stay).
- Bull call spread: buy lower strike call, sell higher strike call — bullish, debit.
- Bear put spread: buy higher strike put, sell lower strike put — bearish, debit.
- Bull put spread: sell higher put, buy lower put — bullish, credit.
- Bear call spread: sell lower call, buy higher call — bearish, credit.
Example
You buy an AAPL $200 call and sell an AAPL $210 call, both expiring in 30 days, for a net debit of $3.50 ($350). Max profit = $10 − $3.50 = $6.50. Max loss = $3.50 premium paid.
Related Terms
Butterfly Spread
A 3-leg defined-risk options strategy: buy 1 lower-strike, sell 2 middle-strike, buy 1 higher-strike — all at the same expiry. Max profit if price pins the middle strike.
IntermediateCalendar Spread
A spread trade that is simultaneously long one contract month and short another month of the same futures product.
IntermediateCalendar Spread (Options)
Sell a near-dated option and buy a longer-dated option at the same strike. Profits from faster near-term theta decay and favorable IV term structure.
IntermediateCall Option
An options contract giving the buyer the right to purchase the underlying asset at the strike price before or on expiration.
BeginnerCovered Call
An options strategy where the holder of a long stock position sells a call option against it, generating income at the cost of capping upside.
IntermediateIron Condor
A four-leg options strategy that sells an OTM call spread and an OTM put spread simultaneously, profiting when the underlying stays range-bound.
AdvancedPut Option
An options contract giving the buyer the right to sell the underlying asset at the strike price before or on expiration.
BeginnerStrike Price
The fixed price at which the option holder can buy (call) or sell (put) the underlying asset if they choose to exercise.
Beginner