Debit Spread
An options strategy combining a bought and a sold option for a net cost, with defined risk and reward.
Related terms
Related lessons
Option Premium: Intrinsic & Extrinsic Value
What you actually pay for when you buy an option. The premium split into intrinsic value (real, exercisable worth) and extrinsic value (time and possibility), the four forces that move it, why options decay, and how implied volatility prices uncertainty.
The Covered Call
The most popular income strategy: selling a call against 100 shares you already own to collect premium. How it pays off, the income-for-upside trade-off, the three outcomes, when it makes sense, and the risks it does — and does not — protect against.
Credit Spreads
The debit spread's mirror image: sell the nearer option and buy a further one for protection, taking in a net credit. A defined-risk way to profit from time decay and a stock staying away from your strike. Bull put and bear call spreads, the payoff maths, and the probability trade-off.
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