Debit Spread
2 definitions

Debit Spread

An options strategy consisting of the buying and selling of options on the same underlying stock, in which the cost of the option purchases is greater than the proceeds of the sale, resulting in a debit at the time of entry into the strategy. Breaking even or profiting from a debit spread requires that the value of the purchased options increase to cover at least the debit.

Rules: A debit spread consists of either all calls or all puts on the same underlying with the same expiration date.

Example:      Calls – Long call strike is lower than the short call strike
                    Puts – Short put strike is lower than the long put strike

Debit Spread

An option spread in which there is a net payout of premium.

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About this term

Debit Spread has been defined 2 different ways in documents like Glossary, CME Group Glossary.

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