What Is a Vertical Spread? Types and Options Strategies

By Forex & Brokers DeskUpdated Nov 10, 2026

Definition

A vertical spread buys one option and sells another of the same type, underlying and expiration at a different strike, so both maximum gain and maximum loss are fixed at entry.

Key takeaways

Bullish verticals buy the lower strike and sell the higher; bearish verticals sell the lower and buy the higher.
For any vertical spread, maximum profit plus maximum loss equals the width between the two strikes.
A debit spread risks the net debit, while a credit spread risks the width minus the net credit collected.
Each leg has its own commission and bid-ask spread, which can eat a meaningful share of profit on narrow spreads.

A vertical spread is an options strategy that buys one option and sells another of the same type (both calls or both puts) on the same underlying asset with the same expiration date but different strike prices. The name comes from the option chain, where strikes are listed in a column, so the two legs sit vertically above one another. Because one leg is bought and the other sold, the maximum gain and maximum loss are both fixed and known when the trade is opened.

How a Vertical Spread Works

Every vertical spread has two legs:

A long option at one strike, which you pay premium for.
A short option at a different strike, which you collect premium for.

The difference between the strikes is the width of the spread. Together with the net premium, it defines the whole payoff. If the option you buy costs more than the one you sell, you pay a net debit (a debit spread). If the option you sell brings in more, you receive a net credit (a credit spread).

Beyond the short strike, any further gain on the long option is canceled by an equal loss on the short option, so profit stops growing. In the other direction, the long option limits what the short option can cost you, so loss is capped too.

Types of Vertical Spreads

Bullish vertical spreads

A bullish trader buys the lower strike and sells the higher strike.

Bull call spread (long call vertical): buy a lower-strike call, sell a higher-strike call. The lower-strike call costs more, so it opens for a net debit.
Bull put spread: buy a lower-strike put, sell a higher-strike put. The higher-strike put costs more, so it opens for a net credit.

Bearish vertical spreads

A bearish trader sells the lower strike and buys the higher strike.

Bear put spread: buy a higher-strike put, sell a lower-strike put. This opens for a net debit.
Bear call spread: sell a lower-strike call, buy a higher-strike call. This opens for a net credit.

Calculating Profit, Loss and Breakeven

The formulas below are per share, at expiration, and exclude commissions. For standard US equity options, multiply by 100 shares per contract.

Spread	Opens for	Max profit	Max loss	Breakeven
Bull call	Net debit	Width − net debit	Net debit	Long call strike + net debit
Bear put	Net debit	Width − net debit	Net debit	Long put strike − net debit
Bull put	Net credit	Net credit	Width − net credit	Short put strike − net credit
Bear call	Net credit	Net credit	Width − net credit	Short call strike + net credit

For any vertical spread, maximum profit plus maximum loss equals the width of the strikes.

Example of a Vertical Spread

Hypothetical bull call spread. Stock XYZ trades at $100. A trader buys the 100-strike call for $5 and sells the 110-strike call for $2, both expiring on the same date.

Net debit: $5 − $2 = $3 per share ($300 per contract)
Width: $110 − $100 = $10
Max profit: $10 − $3 = $7 per share ($700), reached at $110 or above
Max loss: $3 per share ($300), at $100 or below
Breakeven: $100 + $3 = $103

Outcomes at expiration:

XYZ at $115: the long call is worth $15 and the short call costs $5, a net $10. After the $3 debit, the profit is $7.
XYZ at $106: the long call is worth $6 and the short call expires worthless. Profit is $6 − $3 = $3.
XYZ at $98: both calls expire worthless. The loss is the $3 debit.

Hypothetical bull put spread (credit). With XYZ at $100, a trader sells the 95-strike put for $3 and buys the 90-strike put for $1, collecting a $2 credit. The maximum profit is $2 if XYZ stays above $95. The maximum loss is $5 − $2 = $3 if XYZ finishes below $90. Breakeven is $95 − $2 = $93.

How Traders Use Vertical Spreads

Vertical spreads suit a forecast of a moderate move in a known direction. Traders choose them to:

Reduce the cost of a directional bet. The short call finances part of a bull call spread, so it costs less than the long call alone.
Define risk in advance. Unlike a naked short option, a credit spread has a maximum loss known at entry, and the margin for a defined-risk spread is usually based on that loss.
Choose between paying and collecting premium. A debit spread pays up front and needs the underlying to move. A credit spread collects up front and can profit if the underlying moves favorably, stays flat, or moves against the trader by less than the cushion to the short strike.

Strike selection shapes the trade. Wider strikes raise both profit potential and capital at risk. Strikes closer to the current price are more likely to finish in the money but cost more or pay less. Before expiration, time decay and implied volatility affect the two legs differently, and the spread’s net option Greeks show how its value responds.

Limitations of a Vertical Spread

Capped upside. In a large trending move, gains stop at the short strike, while a single long option would keep gaining.
Two sets of costs. Each leg carries a commission and its own bid-ask spread, which can take a meaningful share of the maximum profit on narrow spreads.
Early assignment. On American-style options, the short leg can be assigned early, most often when it is deep in the money or, for calls, just before an ex-dividend date. The long leg still protects the position, but the trader holds stock or a short stock position until it is closed.
Pin risk. If the price ends near the short strike, it can be unclear whether the short leg will be exercised, leaving an unexpected position after the close.
Full loss is a real outcome. The maximum loss can be reached, and on a credit spread it is larger than the premium collected.

Horizontal (calendar) spread: same strike, different expirations. It trades differences in time decay rather than a move between strikes.
Diagonal spread: different strikes and different expirations, combining features of vertical and calendar spreads.
Ratio spread: unequal leg quantities, for example buying one call and selling two. The extra short option can leave unlimited risk on one side, so it is not a defined-risk vertical.
Naked option: a single put option or call with no offsetting leg. See the options overview.
Straddle: a call and a put at the same strike, a bet on the size of a move rather than its direction.

FAQs

Do you close a vertical spread as one order or leg by leg?

Most brokers let you close both legs together as one spread order at a net price, which avoids the risk of one leg filling without the other. Closing legs separately leaves an uncovered position between fills.

Should you hold a vertical spread to expiration?

You do not have to. Closing early locks in the current value and removes assignment and pin risk, which is why many traders do it. Only holding to expiration captures the full maximum profit.

The Bottom Line

Vertical spreads fit options traders who expect a moderate move in a known direction and want their risk defined before entering. They cost less than a single long option or cap the loss of a short one, but gains stop at the short strike. Traders should size positions assuming the full loss can happen and watch for early assignment and pin risk near expiration.