The vertical debit spread refers to a vertical spread whereby a net debit is taken to enter the trade. A bullish vertical debit spread can be constructed using call options and is known as the bull call spread. A bearish vertical debit spread can be created using put options and is known as the bear put spread.
Vertical Credit Spread
Vertical spreads can also be entered on a credit. See vertical credit spread.
Scope of the risk estimate
This page describes a family of positions or a hedge. Exact profit, loss and breakeven depend on the specified legs, valuation date, contract terms and any underlying portfolio. A portfolio hedge also depends on basis and correlation; protection is not guaranteed. Do not infer an exact payoff or a risk-free arbitrage from the strategy name alone.
Strategy assumptions reviewed:
Sources: OIC strategy reference; OIC assignment guidance. Formulas use the stated payoff assumptions; examples are illustrative, not market quotes. Editorial standards and corrections.