Vertical spreads

Defined risk, defined reward

Professional - Gold & Platinum

In this lesson

Build bull call and bear put spreads and calculate their cost, maximum profit, maximum loss and break-even.

Key takeaways

• A vertical spread buys one option and sells another of the same type and expiry, different strike.
• Debit spread: max loss = net cost; max profit = strike gap − net cost.
• Bull call spread profits from a rise; bear put spread from a fall.
• Defined risk makes spreads easier to size than naked option selling.

Next lesson: Volatility skew and term structure

Educational information only - not financial advice.