Vertical spreads, explained
Why a spread caps both your cost and your profit, with the actual math
Published July 18, 2026 · Updated July 18, 2026
A vertical spread buys one option and sells another of the same type and expiry at a different strike. It cuts your cost versus buying the option outright, and in exchange it caps your profit. It is the most common way traders express a directional view without paying full price for a naked call or put.
The worked example below is a bull call spread, priced with the same Black-Scholes engine the calculator runs. Every number is reproducible: open the calculator, pick "Vertical spread," and you will see these exact figures.
Open this spread in the calculator → A 100/105 bull call spread on a $100 stock, 30 days out. Change any strike, date, or price and watch the net update.The trade: buy the 100 call, sell the 105 call
Stock at $100, 30 days to expiry, 45% implied volatility. You buy the $100 call for $5.32 and sell the $105 call for $3.27, a net debit of $2.05. That $2.05 is the most you can lose. The most you can make is the distance between strikes minus the cost: $5.00 − $2.05 = $2.95. Compare that to buying the $100 call alone for $5.32, which needs the stock above $105.32 just to break even.
| Stock price | Spread value now (30 DTE) | Spread value at expiry |
|---|---|---|
| $95 | $1.33 | $0.00 |
| $100 | $2.05 | $0.00 |
| $102.05 (breakeven) | $2.35 | $2.05 |
| $105 | $2.79 | $5.00 |
| $110 | $3.46 | $5.00 |
Values computed with the Black-Scholes model at a 4.5% risk-free rate. Same math the calculator runs.
Reading the table:
- The cost and the payoff are both capped. You pay $2.05 and can make at most $2.95. Above $105 at expiry the spread is worth its full $5.00 width, no more, no matter how high the stock goes.
- The breakeven is $102.05, the long strike plus the net debit. The naked $100 call breaks even at $105.32. The spread's lower breakeven is the payoff for capping your upside.
- Before expiry, the value is smoother. At 30 days the spread is worth $2.79 with the stock at $105, not the full $5.00. It only converges to $5.00 as time runs out, which is why the projection board matters more than a payoff-at-expiry diagram.
Build your own spread
In the calculator, choose a strategy from the dropdown. "Vertical spread" scaffolds a bull call spread from your inputs; edit either strike, flip a leg to short, or switch to Custom to build any two-to-four-leg structure. The board, Greeks, and both breakevens update on the net position, and the net debit or credit is shown as you go.
Try it with your own strikes → Free, no signup, no account. Price any vertical, straddle, strangle, or iron condor across every future date and stock price.Frequently asked questions
What is a vertical spread?
Two options of the same type (both calls or both puts) and the same expiry, at different strikes: you buy one and sell the other. A bull call spread buys the lower-strike call and sells the higher one. It lowers your cost and caps your profit at the distance between the strikes minus what you paid.
Why sell the higher-strike call?
The premium you collect from the short call reduces the cost of the long call, so the spread costs less and breaks even sooner. The trade-off is that the short call caps your gains above its strike. You are giving up unlimited upside in exchange for a cheaper, lower breakeven.
What are the max profit and max loss?
Max loss is the net debit you paid, here $2.05, if the stock finishes at or below the lower strike. Max profit is the width between strikes minus the debit, here $5.00 − $2.05 = $2.95, reached at or above the higher strike at expiry. Both are known the moment you open the trade.
When does a debit spread beat buying the call outright?
When you expect a moderate move to a specific level rather than a runaway rally. The spread costs less and breaks even lower, so it wins for small-to-moderate moves. The naked call wins only if the stock blows well past the short strike, since the spread's profit is capped there. This site shows the numbers; the choice and the risk are yours, and this is not financial advice.