How this calculator works
A vertical spread combines two options of the same type and expiry but different strikes. One leg is bought and the other sold, which caps both the profit and the loss. In a bull call spread you buy the lower-strike call and sell the higher-strike call: you pay a net debit, gain if the underlying rises, and your best result is the width between the strikes minus the debit. A bear call spread sells the lower call and buys the higher one for a net credit, profiting if the underlying stays below the lower strike. Put spreads mirror the logic on the downside. A contract multiplier of 100 shares is assumed.
Formula
Width = high strike - low strike. Bull call: debit = premium of low strike - premium of high strike; max profit = width - debit; max loss = debit; breakeven = low strike + debit. Bear call: credit = the same difference; max profit = credit; max loss = width - credit; breakeven = low strike + credit. Bull put: credit = premium of high strike - premium of low strike; breakeven = high strike - credit. Bear put: debit = the same difference; breakeven = high strike - debit. Multiply dollar amounts by 100 x contracts.
Worked example
A bull call spread buys the $100 call for $4 and sells the $105 call for $2. The net debit is $2 per share, or $200 for one contract. The maximum profit is $5 - $2 = $3 per share, or $300, reached at or above $105. The maximum loss is $200, and the breakeven is $102.
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Frequently asked questions
Why must the premiums be in a particular order?
For a call spread the lower strike normally costs more than the higher strike, because a call becomes more valuable as the strike falls. If the quoted premiums are reversed, the option you mean to buy or sell is probably the other one.
Can a vertical spread lose more than the debit?
Not for the long debit structures here. The maximum loss is the net debit for a bull call or bear put spread. A credit spread keeps the credit but can lose up to the width minus the credit.
What happens at expiry?
Both legs expire together. If the underlying is between the strikes, one leg is exercised and the other expires worthless, leaving the intrinsic value. Outside the range the result is the maximum profit or loss. Early assignment and dividend risk are not modelled.
Are commissions included?
No. Four option legs in and out, exchange fees and the bid-ask spread all reduce the result. Add them to the net cost for a realistic view.