What is a vertical spread in options?

    Short answer

    A vertical spread buys one option and sells another of the same type and expiration at a different strike. Selling the second option lowers cost and caps profit, so both risk and reward are known up front. Debit spreads bet on a move; credit spreads bet price stays away from a level.

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    The four basic verticals

    • Bull call spread (debit): buy a call, sell a higher call.
    • Bear put spread (debit): buy a put, sell a lower put.
    • Bull put spread (credit): sell a put, buy a lower put.
    • Bear call spread (credit): sell a call, buy a higher call.

    The math

    Debit spread: max loss is the debit, max profit is the width minus the debit. Credit spread: max profit is the credit, max loss is the width minus the credit.

    Common questions

    Why use a spread instead of buying a call?

    It costs less and reduces the damage from time decay and IV crush, in exchange for capped upside.

    What width should a spread be?

    Wider spreads cost more and pay more. Traders pick a width that fits the move they expect and the amount they can lose.

    Can I be assigned on a spread?

    Yes, on the short leg, especially near expiration or before a dividend. Brokers usually handle it, but know the risk.

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    Educational only, not investment advice. Options involve risk and are not suitable for all investors. See how Intel is reviewed.