Infinance, adebit spread, a.k.a.net debit spread, results when an investor simultaneously buys anoption with a higherpremium and sells an option with a lower premium. The investor is said to be anet buyer and expects the premiums of the two options (theoptions spread) to widen.
Investors want debit spreads towiden for profit.
A bullish debit spread can be constructed using calls. Seebull call spread.
A bearish debit spread can be constructed using puts. Seebear put spread.
A bull-bear phase spread can be constructed using near month call & put.
The maximum gain and loss potential are the same for call and put debit spreads. Note thatnet debit = difference in premiums.
Maximum gain = difference in strike prices - net debit, realized when both options arein-the-money.
Maximum loss = net debit, realized when both options expire worthless.
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