How to use the vertical spread calculator
A vertical spread combines two options of the same type and expiry: one bought, one sold, at different strikes.
- Choose the strategy. A bull call spread or bull put spread profits from a rise; a bear put spread or bear call spread from a fall. Bull call and bear put are debit spreads (you pay); bull put and bear call are credit spreads (you are paid).
- Choose how to enter the price. Enter the premium of each leg from the option chain, or the net debit or credit if you trade the spread as a single order. The labels show which leg is bought and which is sold.
- Enter the strikes and the number of spreads. One spread is one bought and one sold contract, each covering 100 shares.
- Optionally enter the stock price now to see how far it is from the break-even, and a commission per contract, which is charged on both legs.
The chart shows the profit or loss at expiry, with flat sections beyond both strikes. The table lists the spread’s value and the result at prices around the strikes.
The formulas
Debit spread: Max profit = (Width − Debit) × 100 × n Max loss = Debit × 100 × n
Credit spread: Max profit = Credit × 100 × n Max loss = (Width − Credit) × 100 × nn is the number of spreads. Debit and credit are per share: the premium of the bought option minus that of the sold option, or the other way round. Commissions reduce the maximum profit and add to the maximum loss.
Bear put break-even = Upper strike − Debit
Bull put break-even = Upper strike − Credit
Bear call break-even = Lower strike + Credit
Risk-reward = Max loss : Max profitThe break-even is always the strike of the option nearer the money, moved by the net premium.
A worked example
A stock trades at $104. You expect a moderate rise over the next few weeks, so you buy the $100 call for $6.40 and sell the $110 call for $2.30, 2 contracts of each.
The net debit is $4.10 a share, which is also the most you can lose: $822.60 including commissions. The spread is $10.00 wide, so it can be worth at most $2,000 at expiry and the maximum profit is $1,177.40. The break-even is $104.11, and the risk-reward is 1 : 1.43.
The same view could be expressed by buying the $100 call alone for $6.40. That costs more, needs the stock above $106.40 just to break even, and has no cap. Selling the upper call makes the trade cheaper and moves the break-even down, in exchange for giving up everything above $110.
The four vertical spreads compared
With the same $100 and $110 strikes and example premiums for each option:
| Strategy | View | Net premium | Maximum profit | Maximum loss | Break-even |
|---|---|---|---|---|---|
| Bull call (debit) | Rise | $4.10 paid | $1,177.40 | $822.60 | $104.11 |
| Bull put (credit) | Rise | $5.85 received | $1,167.40 | $832.60 | $104.16 |
| Bear put (debit) | Fall | $5.85 paid | $827.40 | $1,172.60 | $104.14 |
| Bear call (credit) | Fall | $4.10 received | $817.40 | $1,182.60 | $104.09 |
The two bullish spreads end up almost identical, and so do the two bearish ones. That is not a coincidence: when calls and puts on the same strikes are fairly priced relative to each other, a call spread and a put spread with the same strikes have nearly the same payoff, and the small gap reflects interest on the cash. The choice between them comes down to practical details: whether you prefer to pay or be paid up front, which options trade with tighter bid-ask spreads, and early assignment risk on the option you sell.
Choosing the width
Wider spreads cost more and can make more. With the lower strike fixed at $100 and example premiums for the upper calls:
| Bull call spread | Net debit | Maximum profit | Maximum loss | Risk-reward |
|---|---|---|---|---|
| $100 / $105 | $2.45 | $507.40 | $492.60 | 1 : 1.03 |
| $100 / $110 | $4.10 | $1,177.40 | $822.60 | 1 : 1.43 |
| $100 / $115 | $5.35 | $1,927.40 | $1,072.60 | 1 : 1.80 |
A narrow spread close to the money is cheap but needs little room to reach its cap; a wide one behaves more like the bought call on its own. A better risk-reward ratio usually comes with a target further away, which the stock reaches less often. The ratio alone does not make a spread attractive; the risk-reward calculator shows how the win rate needed to break even depends on it.
Credit spreads and the size of the loss
Credit spreads often show a small maximum profit against a larger maximum loss, as the bear call spread does here. They win more often because the stock only has to stay on the right side of the break-even, but one full loss can wipe out several wins. Compare spreads by their maximum loss and break-even, not by the premium collected.
To combine a bull put spread and a bear call spread into a range-bound trade, see the iron condor calculator.
What this calculator does not include
- Value before expiry. Closing the spread early gives a result that depends on time left and implied volatility. The Black-Scholes calculator can price each leg.
- Early assignment. The sold option can be exercised before expiry, most often when it is deep in the money or just before an ex-dividend date. The bought option still limits the loss, but you may have to act.
- Pin risk. If the stock closes very near the short strike on expiry day, you may not know until after the close whether you will be assigned.
- Margin requirements and taxes, which depend on your broker and account.
- Bid-ask spreads. With two legs, entering at the midpoint is often not possible, so use your actual fill prices.