Options strategies
Debit spread
Definition
A vertical spread that costs money to open, because the option you buy is worth more than the one you sell. The net debit is the most you can lose.
Example
Say a stock trades at $50 and you buy a $50 call for $2.40 and sell a $55 call for $0.90, a net debit of $1.50, or $150. At expiration, below $50 both calls expire worthless and you lose the $150; above $55 the spread is worth its full $5 width, $500, for a $350 gain. Your breakeven is $51.50.
Hypothetical numbers, for illustration only.
UpTickFlow is our product. These guides are education, not financial advice. Trading involves a substantial risk of loss.