Vertical Spread Analyzer
Select a spread type, enter both strikes and their premiums, and instantly calculate max profit, max loss, breakeven, risk/reward ratio, and an approximation of probability of profit. The payoff diagram updates with each calculation.
Direct Answer
A vertical spread analyzer calculates the max profit, max loss, and breakeven price of a bull call, bear put, bull put, or bear call spread from the two strike prices and premiums you enter. Because both legs expire together, the risk and reward are capped and known upfront, unlike a single-leg option position. Select the spread type and enter both strikes and premiums below to see max profit, max loss, breakeven, risk/reward ratio, and an estimated probability of profit.
Payoff at Expiration
Vertical axis: P&L per share. Breakeven marked in amber. Current underlying price marked in purple (if entered). Values exclude transaction costs.
How to use this analyzer
- Select spread type: Choose from the four standard vertical spread structures. The label describes which leg you buy and which you sell.
- Lower strike / Higher strike: The two option strikes in the spread. The lower strike must be less than the higher strike.
- Premiums: Enter the market price per share of each leg. For the leg you are buying, enter what you will pay. For the leg you are selling, enter what you will receive. Both fields take positive numbers, the tool knows which is which based on spread type.
- Contracts: Number of spread contracts (each contract = 100-share spread).
- Current underlying price: Optional. Used only to mark your current position on the payoff chart.
- Click Analyze Spread to compute all metrics.
Spread type guide
- Bull call spread (debit): Buy lower-strike call, sell higher-strike call. Pay a net debit. Profit if stock rises above lower strike + debit. Used when moderately bullish.
- Bear put spread (debit): Buy higher-strike put, sell lower-strike put. Pay a net debit. Profit if stock falls below higher strike − debit. Used when moderately bearish.
- Bull put spread (credit): Sell higher-strike put, buy lower-strike put. Receive a net credit. Profit if stock stays above higher strike − credit. Used when neutral-to-bullish, prefer to collect premium.
- Bear call spread (credit): Sell lower-strike call, buy higher-strike call. Receive a net credit. Profit if stock stays below lower strike + credit. Used when neutral-to-bearish, prefer to collect premium.
For the construction logic, formulas, and worked examples behind each spread type, see Vertical Spreads: Debit and Credit.
Understanding the outputs
Max profit: The maximum gain per share achievable. For debit spreads: spread width − net debit. For credit spreads: net credit received. Achieved when both legs expire in the money (debit) or both expire out of the money (credit).
Max loss: The maximum loss per share. For debit spreads: the net debit paid (if both legs expire worthless). For credit spreads: spread width − net credit (if both legs expire in the money). This is the defined risk, no loss beyond this amount is possible with the spread structure.
Breakeven: The underlying price at which the spread produces zero profit or loss at expiration. For debit spreads: lower strike + net debit (bull call) or higher strike − net debit (bear put). For credit spreads: higher strike − net credit (bull put) or lower strike + net credit (bear call).
Risk/reward ratio: Max loss divided by max gain. A 2:1 ratio means you risk $200 to potentially make $100. Lower ratios (closer to 1:1) indicate more balanced risk/reward; credit spreads typically have higher ratios because the probability of profit is higher in exchange for worse reward relative to risk.
Probability of profit (approx.): Estimated as the percentage of the spread width that sits in the profitable zone relative to the breakeven. This is a heuristic approximation, actual probability depends on implied volatility, time to expiration, and the full option pricing model. For credit spreads: net credit / spread width (proportion of width that is credit). For debit spreads: (width − debit) / width. This gives a rough sense of how much the underlying must move (or not move) for the spread to profit.
Assumptions and limitations
- Expiration-only analysis: All results assume positions held to expiration. Pre-expiration values depend on time remaining, implied volatility, and the Greeks of each leg, use the Greeks Visualizer for pre-expiration behavior.
- No transaction costs: Commissions and bid-ask spreads are not included. For multi-leg spreads, these can be $5-$15 per contract round-trip (entry + close), which should be factored into your targets.
- Standard 100-share contract multiplier: Results assume standard US equity options. Non-standard multipliers (mini options, index options) may differ.
- Probability of profit is approximate: The heuristic shown is not derived from an option pricing model. For model-derived probability, use the short option's delta as the probability of that strike expiring in the money (for credit spreads, probability of profit ≈ 1 − short option delta).
- American-style exercise: For spreads on equity options, early assignment on the short leg is possible. This is rare but can affect actual outcomes. European-style index options (SPX, NDX) eliminate early assignment risk.
- This tool analyzes single vertical spreads only. For iron condors (two verticals combined) or butterflies, see the Iron Condors and Iron Butterflies guide.
FAQ
What is the difference between a debit spread and a credit spread?
Debit spreads require a net payment at entry (the premium paid for the long leg exceeds the premium received for the short leg). They profit when the underlying moves in the desired direction. Credit spreads generate a net receipt at entry (the premium received for the short leg exceeds the premium paid for the long leg). They profit when the underlying stays neutral or moves slightly in the favorable direction, and the primary edge is premium collection. Both are defined-risk structures, neither can lose more than the calculated maximum loss.
When should I prefer a bull call spread over a bull put spread?
Both profit from a moderately bullish move, but through different mechanisms. A bull call spread is a debit spread, you pay now and profit if the stock rallies above your breakeven. It is better when implied volatility is low (cheap to buy calls) and you want explicit participation in an upward move. A bull put spread is a credit spread, you collect premium and profit if the stock stays above your short put strike. It is better when implied volatility is elevated (more premium to collect) and you want to profit from theta decay even if the stock moves sideways. The bull put spread has higher probability of profit but a less favorable risk/reward ratio per dollar wagered.
How do I choose the right spread width?
Spread width (the distance between the two strikes) controls the trade-off between premium collected (or paid) and maximum risk. Wider spreads collect (or cost) more in absolute dollar terms but require more capital and have a larger maximum loss. Narrower spreads collect less premium but also have smaller maximum loss. For credit spreads, a common approach is to choose strikes such that the short leg has a 15-30 delta (suggesting 15-30% probability of expiring in the money for that strike). The width then determines how much capital is at risk relative to the credit collected. A $5 wide spread collecting $1.50 credit has max loss of $3.50 and requires committing $350 per contract of capital.
What happens if the underlying expires exactly at one of my strikes?
If the underlying expires exactly at the short strike (for credit spreads), the short option expires at the money, it may or may not be assigned, depending on the option holder's instructions. If the underlying expires between the two strikes, both the intrinsic value and the spread's P&L fall between max gain and max loss. In this case, the long leg expires worthless (OTM) while the short leg has intrinsic value, or vice versa. The payoff diagram shows the exact P&L for any underlying price at expiration.
Can I close a vertical spread before expiration?
Yes, and it is often preferable to do so. The standard guidance for credit spread sellers is to close at 50% of maximum profit, buying back the spread for 50% of the original credit received. For debit spread buyers, the decision depends on whether the spread has appreciated in value due to the underlying's move; closing when the spread reaches 50-75% of maximum theoretical value locks in gains while avoiding final-week gamma risk. Early close is done as a single "spread order" (buying and selling both legs simultaneously) to avoid legging risk from executing them separately.
How is the breakeven calculated differently for a debit spread and a credit spread?
For a debit spread, breakeven starts at the long strike and moves against the position by the net debit paid: a bull call spread breaks even at the lower strike plus the debit. For a credit spread, breakeven starts at the short strike and moves in the position's favour by the net credit received: a bull put spread breaks even at the higher strike minus the credit. In both cases the breakeven sits between the two strikes, which is why a vertical has a single crossing point rather than two.
Why is the maximum loss on a credit spread the strike width minus the credit?
If the underlying finishes beyond both strikes, both legs are in the money and the spread is worth the full distance between the strikes. The writer must settle that amount but keeps the credit taken in at the start, so the net loss is the width minus the credit, multiplied by the contract size. That figure is also the collateral a broker holds, which is why a credit spread's capital requirement and its worst case are the same number.
Is a short strike's delta the same as the spread's probability of profit?
It is a rough approximation, not an equality. Under the model's assumptions, a strike's delta is close to the risk-neutral probability that the option finishes in the money, so one minus that figure approximates the chance the short strike is not breached. Two things break the equivalence. The relevant threshold for profit is the breakeven, not the short strike, because the credit received shifts it. And risk-neutral probabilities are derived from prices that embed a volatility risk premium, so they are not forecasts of real-world outcomes.
How does a change in implied volatility affect a debit spread compared with a credit spread?
A vertical spread is long one option and short another, so the two vega exposures largely offset and the net is small compared with a single option. The residual has a sign. An out-of-the-money debit spread is generally net long vega, so rising implied volatility helps it, while an out-of-the-money credit spread is generally net short vega and is helped by falling implied volatility. The offset is closest to complete when the strikes are near each other and when both sit at similar moneyness.
References
Disclaimer
This tool is for educational and informational purposes only. Results are mathematical computations at expiration and do not account for early exercise, early assignment, transaction costs, taxes, or market impact. Probability of profit figures are approximations, not model-derived probabilities. This is not investment advice. Options trading involves risk of loss. Consult a qualified financial professional before trading options.