Vertical Spread

 Long Call Vertical Spread

A long call vertical spread is a bullish, defined risk strategy made up of a long and short call at different strikes in the same expiration.

Directional Assumption: Bullish

Setup:
- Buy ITM Call
- Sell OTM Call

Ideal Implied Volatility Environment: Low

Max Profit: Distance Between Call Strikes - Net Debit Paid

How to Calculate Breakeven(s): Long Call Strike + Net Debit Paid

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Long Put Vertical Spread

A long put vertical spread is a bearish, defined risk strategy made up of a long and short put at different strikes in the same expiration.

Directional Assumption: Bearish

Setup:
- Buy ITM Put
- Sell OTM Put

Ideal Implied Volatility Environment: Low

Max Profit: Distance Between Put Strikes - Net Debit Paid

How to Calculate Breakeven(s): Long Put Strike - Debit Paid

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Short Call Vertical Spread

A short call vertical spread is a bearish, defined risk strategy made up of a long and short call at different strikes in the same expiration.

Directional Assumption: Bearish

Setup:
- Sell OTM Call (closer to ATM)
- Buy OTM Call (further away from ATM)

Ideal Implied Volatility Environment: High

Max Profit: Credit received from opening trade

How to Calculate Breakeven(s): Short call strike + credit received

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Short Put Vertical Spread

A short put vertical spread is a bullish, defined risk strategy made up of a long and short put at different strikes in the same expiration.

Directional Assumption: Bullish

Setup:
- Sell OTM Put (closer to ATM)
- Buy OTM Put (further away from ATM)

Ideal Implied Volatility Environment: High

Max Profit: Credit received from opening trade

How to Calculate Breakeven(s): Short Put Strike - Credit Received