How to: Options Debit Spreads
Lower your risk on Options Trades with this simple strategy.
Published in
4 min readSep 6, 2020
This article serves to introduce the fundamentals of Options Debit Spreads, along with how to use them effectively to generate profit.
Introduction
With the prices of stocks skyrocketing and the uncertainty of the future, It can be hard to commit large chunks of money on buying Calls/Puts. Instead, Debit Spreads can serve as a better alternative, because they require low capital, and can be performed on any stock/etf that supports options.
If you have a strong idea of the movement of a stock, then you can open:
- Put Debit Spread (we will call this a “PDS”)
- Call Debit Spread (we will call this a “CDS”)
How do Debit Spreads Work?
Firstly, it is important to break down Debit Spreads.
A spread is an option order that has more than 1 leg.
A “debit” is an amount of money that you have to pay.
In summary, a debit spread is a multi-legged option order that you have to pay for.
