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All examples do not include commissions. Bull call spread : premiums result in a net debit. Bear call spread : premiums result in a net credit. Bull put spread : premiums result in a net credit. Bear put spread : premiums result in a net debit. An investor looking to bet on a stock moving higher may embark on a bull vertical call spread.

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Vertical Spreads for Up and Down Markets

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Popular Courses. What Is a Vertical Spread? Key Takeaways A vertical spread is an options strategy that involves buying selling a call put and simultaneously selling buying another call put at a different strike price, but with the same expiration. Bull vertical spreads increase in value when the underlying asset rises, while bear vertical spreads profit from a decline in price. Vertical spreads limit both risk and the potential for return.

Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation. Related Terms Understanding the Bull Vertical Spread A bull vertical spread is used by investors who feel that the market price of a commodity will appreciate but wish to limit the downside potential associated with an incorrect prediction. Bull Spread A bull spread is a bullish options strategy using either two puts or two calls with the same underlying asset and expiration. Bear Spread Definition A bear spread is an options strategy implemented by an investor who is mildly bearish and wants to maximize profit while minimizing losses.

Debit Spread Definition A debit spread is a strategy of simultaneously buying and selling options of the same class, different prices, and resulting in a net outflow of cash. Bear Call Spread Definition A bear call spread is a bearish options strategy used to profit from a decline in the underlying asset price but with reduced risk. Partner Links. Related Articles.

Trade is initiated by selling a call and buying a higher strike call with the same expiration. A put credit spread is created by selling a put and buying a lower strike put with the same expiration.

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The option trader believes the stock will stay above a certain level like support for maximum profit. He sells the call and buys the call see below. The maximum profit on the trade is the credit received. The positive theta on the trade is approximately 0. Not bad, right?

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But look at the negative delta on the trade. It is approximately Theta is very important when it comes to potential profit when trading vertical credit spreads. But a correct move away from the short option can make you a whole lot more profitable and sooner because of delta. Options involve risk and are not suitable for all investors.

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