What is a debit spread?
What do you pay for, and what do you get?
A debit spread is a spread in which the option bought is worth more than the one sold, so opening it costs a net debit. That debit is the maximum loss; maximum gain is the strike width minus the debit. Unlike a credit spread it needs an actual move, not just time passing.
Why sell the second option
A debit spread starts as a single long option and then sells a further-out option of the same type against it. The sold option pays for part of the purchase, which lowers the cash at risk, and in exchange caps the gain at the second strike. You give up everything beyond that strike to pay less for the move up to it. That trade is worth making when you expect a move of a certain size, not an open-ended one.
How debit and width set the payout
Maximum loss is the debit, maximum gain the width minus the debit, and the break-even is the long strike moved by the debit towards the short strike. A debit of half the width risks one to make one. Paying a smaller share of the width improves the payout, but it usually means the long strike sits further from the share price, so the stock has to travel further before the spread pays anything at all.
The common misreading
A debit spread is often treated as a cheaper long call or long put that behaves the same way. It does not. The short leg offsets much of the long leg’s sensitivity to price, so the spread gains slowly while plenty of time remains, even when the stock moves the right way. Most of its value only arrives close to expiration, and closing early after a favourable move typically captures a fraction of the maximum gain.
Worked example
Hypothetical numbers for illustration, not a market quote and not a recommendation.
An example stock trades at 100 €. You buy the 100 € put and sell the 92 € put with the same expiration, paying a net debit of 3 € per share, or 300 € per contract. The spread is 8 € wide.
If the stock closes at or above 100 € at expiration, both puts expire worthless and the 300 € is lost. At or below 92 € the spread is worth its full width, a profit of (8 − 3) × 100 = 500 €. The break-even is 100 − 3 = 97 €. You risk 300 € to make 500 €. Fees are ignored.
Strategies where the term matters
- Bull Call Spread — Is the upper strike a realistic price target inside this expiration?
- Bear Put Spread — Is the lower strike a realistic downside target inside this expiration?
- Long Call Diagonal — Does the upper strike sit above the lower strike plus the debit you paid?
Calculators for this term
Track it in your journal
Related terms
Every term in one place: the options glossary.
This material is general information about option strategies, written for a general audience. It is not investment advice, not a recommendation, and not financial analysis. Options can lose their entire value, and uncovered positions can lose more than the amount committed. Anything said about tax is general in nature and is no substitute for professional tax advice. Last reviewed: 2026-08-06.