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The Signal Ledger Academy · Intermediate

Vertical Debit Spreads: Bull Calls and Bear Puts

A debit vertical buys an option and sells another of the same type and expiration at a different strike. The short leg reduces entry cost while limiting the favorable expiration payoff.

By The Signal Ledger · Prepared

Understand the position

In the bull-call example, buy the $100 call for $6 and sell the $110 call for $2. Net debit is $4 per share, or $400. The $10 strike width caps the gross expiration value at $1,000, leaving maximum profit $600 and maximum loss $400 before costs.

A bear-put debit spread reverses directional intent: buy a higher-strike put and sell a lower-strike put. For a hypothetical $110/$100 put spread bought for $4, maximum profit is also $6 per share and break-even is $106, with gains toward lower stock prices.

Read the payoff and try a scenario

Visual lesson · hypothetical data

Bull call debit spread: profit and loss at expiration

Bull call debit spread: profit and loss at expirationOriginal hypothetical example. Includes entry premiums and, where specified, the stock purchase. Excludes fees, taxes, dividends, financing and early assignment. Lines describe expiration economics with all legs intact; they are not pre-expiration market values. Exact values follow in the chart data table.-50510Net P/L · USD per shareBE $104708090100104110120130Stock price at expiration · USD
Bull call debit spread: profit and loss at expirationOriginal hypothetical example. Includes entry premiums and, where specified, the stock purchase. Excludes fees, taxes, dividends, financing and early assignment. Lines describe expiration economics with all legs intact; they are not pre-expiration market values. Exact values follow in the chart data table.-50510Net P/L · USD per shareBE $104708090100104110120130Stock price at expiration · USD
━ Whole position P/L
Original hypothetical example. Includes entry premiums and, where specified, the stock purchase. Excludes fees, taxes, dividends, financing and early assignment. Lines describe expiration economics with all legs intact; they are not pre-expiration market values.
  1. Buy the $100 call for $6; sell the $110 call for $2. Same expiration; $4 net debit.
  2. Expiration break-even stock price: $104 before costs.
  3. The plot displays $70–$130 only. Move the control to $0 to examine a stock collapse; the right edge is not an upside bound.
Read the chart data
Bull call debit spread: profit and loss at expiration — original illustrative data
Stock price at expiration · USDWhole position P/L (Net P/L · USD per share)
70-4
80-4
90-4
100-4
1040
1106
1206
1306
At $100, whole-position P/L: $-400 before costs.

One contract per option leg; 100 shares where the strategy includes stock. Read the fixed position above before changing the price.

For the illustrated call spread, stock $105 gives the long call $5 intrinsic and the short call zero, less the $4 debit: $100 net profit per spread. At $110 or higher, the two call values differ by $10, so profit is capped at $600. Break-even is $104.

Separate expiration economics from live prices

The diagram calculates net profit or loss at expiration with the specified position intact. Before that date, remaining time, implied volatility, rates, dividends and bid–ask spreads affect each leg’s market value. A break-even shown here is an expiration break-even, not the price at which an early closing trade must be profitable.

For an actual position, calculate net execution costs and contract quantities, and verify every leg’s expiration, underlying and deliverable. The examples use one standard 100-share contract per leg. Adjusted contracts can differ; an incomplete or mismatched hedge changes the risk.

Understand the tradeoffs and obligations

The bounded diagram assumes matching contracts and the complete position being valued or settled together. An American-style short call can be assigned early; a protective long call is not automatically exercised at the same time. Funding and temporary stock exposure can matter.

Closing one leg changes the position. Costs and slippage on two legs reduce net outcomes, and the quoted package may not execute at a displayed midpoint. A lower initial debit does not prove the spread is better than a single option; it buys a different payoff.

Check your understanding

What is the maximum profit on the $10-wide call spread bought for $4?

Show the explanation

($10 width − $4 debit) × 100 = $600 before costs, with the full matching spread intact through settlement.

Sources and editorial notes

Original explanations and hypothetical examples prepared with AI assistance. Primary reference check dates are listed below. Numerical examples are hypothetical unless explicitly identified otherwise.

  • OCC / OIC: Bull Call Spread

    Position construction and risk tradeoffs. All premiums, strikes, payoff graphics, practice questions and calculations are original fictional examples, not copied charts or performance results. Checked October 17, 2026.

  • FINRA / OCC: Understanding Assignment

    Exercise, assignment, after-hours risk and broker cutoff considerations. Strategy diagrams assume intact matching positions through settlement. Checked October 17, 2026.