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.
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.
On the desk
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.