1
Bull call spread
Buy a lower-strike call and sell a higher-strike call with the same expiration.
Lesson · Options Trading
Vertical Debit Spreads
Construct bull call and bear put spreads with the same expiration, calculate net debit, fixed maximum loss, capped maximum profit, and expiration breakeven.
Synthetic educational examples
Core concepts
Buy one option, sell a further one: lower cost, capped reward.
2
Bear put spread
Buy a higher-strike put and sell a lower-strike put with the same expiration.
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Defined outcome range
Net debit is maximum loss; strike width minus debit is maximum profit at expiration.
Worked example
The default bull call spread: long the 100 call at $5.50, short the 110 call at $2.00, one spread, stock $108 at expiration.
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Net debit: 5.50 − 2.00 = $3.50 per share, $350 paid.That is the maximum loss, reached at or below the long strike where both calls expire worthless.
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Width: 110 − 100 = $10. Maximum profit: (10 − 3.50) × 100 = $650.Reached at or above the short strike, where the long call is worth $10 more than the short one and nothing more can be earned.
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Breakeven: 100 + 3.50 = $103.50.The long strike plus the net debit — not the long premium alone. The short leg lowered the debit, so it lowered the breakeven too.
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At $108: long call worth $8, short call $0, less the $3.50 debit = +$4.50 per share, +$450.The purple line, the long call on its own, is at +$2.50 here: $8 − $5.50. The spread is ahead until the stock passes $113, where the single call catches up.
Interactive lesson
Set the two strikes and premiums, then an expiration price; the legs, debit, breakeven and outcome follow.
Debit spreadLong option alone
Build a debit spread
The short strike should reflect a realistic price objective because it caps reward.
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Choose direction
Use a bull call spread for bullish exposure or a bear put spread for bearish exposure.
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Set the long strike
The long option provides the main directional exposure.
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Set the short strike
The short option reduces cost and defines the maximum-reward boundary.
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Verify debit and width
Net debit must be positive and lower than the strike width for a conventional debit spread.
Debit-spread calculations
Score 0 / 0Choose the best answer.
Lesson rule
Change the inputs, calculate the result, and explain the risk before selecting a contract.
Common mistakes
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Selecting the short strike beyond an unrealistic targetPaying for unused width can reduce efficiency.
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Ignoring both-leg executionThe net spread price matters; legging can create unintended exposure.
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Assuming defined risk removes expiration riskAssignment and after-hours movement can still create operational issues near expiration.
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Expecting the maximum profit as soon as the stock passes the short strikeThe chart is the expiration payoff. Weeks earlier the short leg still carries extrinsic value, so a spread that is fully in the money trades well under its width until that value has run out.
Completion standard
✓
Finish when you can build either debit spread and compute the debit, breakeven, maximum loss and maximum profit from the two strikes and two premiums.
The drill asks for each figure separately; the breakeven is the one most often done with the wrong premium.
Model scope: Theoretical values use a simplified European Black–Scholes model with a fixed 4.5% annual rate and no dividend input, so a number here can be reproduced in any calculator that takes those inputs. Listed products, early exercise, dividends, spreads, fees, and market conditions can produce different prices and outcomes.