Introduction

Spreads are a moderately risky option strategy with intermediate difficulty. They involve opening multiple legs with differing strike prices for both bid/ask sides.

The outlook you have, bull vs bear, will determine the lower/higher strike price relative to the underlying price at opening.

Spreads Table

Name	Sentiment	Reward / Purpose	Flow	Moneyness	Loss Drivers	Description
Vertical Spread	Neutral/Bullish	Limited risk/reward (bull/bear vertical)	Buy to open & Sell to open (same expiry)	ITM/OTM	Both legs move against the expected direction or insufficient move to cover spread debit (loss = net premium paid or max spread loss).	Benefit: reduces cost vs a single option and defines risk. Tradeoffs: caps upside or downside vs naked option; requires correct directional bias.
Call Debit Spread	Bullish	Lowered cost vs long call, limited upside	Buy to open lower-strike call; Sell to open higher-strike call	OTM	Underlying fails to rally enough before expiry (net premium lost) or spread widens unfavorably.	Benefit: lower net premium and limited loss. Tradeoffs: capped upside; needs a moderate directional move to profit.
Call Credit Spread	Bearish/Neutral	Premium income, defined risk	Sell to open lower-strike call; Buy to open higher-strike call (same expiry)	OTM	Underlying rallies strongly past short strike causing the spread to widen toward max loss (defined by strike difference minus credit).	Benefit: collect premium with defined max loss. Tradeoffs: profit limited to premium; losing scenario if underlying rallies above strikes.
Put Debit Spread	Bearish	Limited downside protection, lower cost	Buy to open a higher-strike put; Sell to open lower-strike put	OTM	Underlying does not fall sufficiently before expiry (lose net premium); IV collapse reduces value.	Benefit: cheaper hedge than a single put with defined risk. Tradeoffs: reduced payoff vs a long put; needs a sufficient downside move.
Put Credit Spread	Bullish/Neutral	Premium income, defined risk (bull put spread)	Sell to open a higher-strike put; Buy to open lower-strike put	OTM	Underlying falls below short strike and spread approaches max loss (difference between strikes minus credit received).	Benefit: collect premium with capped downside. Tradeoffs: limited profit and obligation to buy if assigned; requires bullish-to-neutral view.

Moneyness

Assuming strikes are DESC order when viewing the option chain you should place your spreads in the following quadrants.

Calls	Puts
Call Debit Spread	Put Credit Spread
Call Credit Spread	Put Debit Spread

Alternative Names

Depending on your broker the strategies might have different names.

Cash Flow	Spread Type	Alternative Name	Structure (Basic)
Debit	Bull Call	Long Call Spread	Buy lower strike call, Sell higher strike call
Credit	Bear Call	Short Call Spread	Sell lower strike call, Buy higher strike call
Credit	Bull Put	Short Put Spread	Sell higher strike put, Buy lower strike put
Debit	Bear Put	Long Put Spread	Buy higher strike put, Sell lower strike put

Conclusion

Vertical spreads are a versatile and risk-defined way to trade options, allowing investors to express bullish or bearish views while controlling both potential profit and loss. By combining long and short positions at different strikes, traders can reduce costs, limit risk, and tailor strategies to market outlook and volatility. Whether you’re seeking income, hedging, or directional exposure, mastering vertical spreads can add precision and flexibility to your options toolkit. As always, understanding the mechanics and risks is key—start with small positions and build confidence as you learn.