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Debit Spreads

A debit spread is an option spread strategy in which the premiums paid for the long leg(s) of the spread is more than the premiums received from the short leg(s), resulting in funds being debited from the option trader's account when the position is entered.

The net debit is also the maximum possible loss when implementing the debit spread option strategy.

Vertical Debit Spreads

Bull Debit Spread

The bull call spread is the option strategy to employ when the option trader is bullish on the underlying security and wish to establish a vertical spread on a net debit.

Bear Debit Spread

If instead, the option trader is bearish on the underlying security, a vertical spread can also be established on a net debit by implementing the bear put spread option strategy.

Non-directional Debit Spread Combinations

Spreads can be combined to created multi-legged, debit spread combinations that are used by the option trader who does not know or does not care which way the price of the underlying security is headed but instead, is more interested in betting on the volatility (or lack thereof) of the underlying asset.

Bullish on Volatility

If the option trader expects the price of the underlying security to swing wildly in the near future, he can choose to implement one of the following spread combination strategies on a net debit.

Bearish on Volatility

If instead, the option trader expects the price of the underlying security to remain steady in the near term, he can choose to implement one of the following debit spread combination strategies.