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Credit spread calculator
sell one, buy protection, keep the difference

A credit spread sells one option and buys a further-out one of the same type and expiry as protection, keeping the difference. There are two: a PUT credit spread below the price, which profits while the underlying stays up, and a CALL credit spread above it, which profits while it stays down. The arithmetic is identical either way - only the side you are avoiding changes. The defaults here price a put credit spread; enter call strikes to price the other side.

Outlook: Neutral — pick the side price should avoid

Max profit

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best case at expiry

Max loss

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worst case at expiry

Breakeven

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where the trade turns even

Net debit / credit

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to open the position

Your credit spread

Per-share premiums. One contract = 100 shares.

Underlying price

Short put @ strike

Premium collected

Long put @ strike

Premium paid

Contracts

100 shares per contract

Profit at expiry Loss at expiry Breakeven Strikes & spot

How a credit spread pays

Net credit = premium collected - premium paid Max profit = net credit x 100 x contracts Max loss = (strike width - net credit) x 100 x contracts Breakeven = short put strike - net credit (put side) = short call strike + net credit (call side) Return on risk = max profit / max loss

The width sets the risk, not the credit. A $5 spread collecting $1.50 risks $3.50 whatever the underlying is. Widen the strikes and the loss grows with them.
Two of three outcomes pay. Up, sideways, or mildly against you can all finish profitable on a put credit spread. That is the appeal, and it hides how much a single loss costs.
Return on risk is the number to compare. A credit of $1.50 on a $5 spread is 43% on risk; the same credit on a $10 spread is 18%. The headline premium says nothing on its own.
Pick the side by where price should NOT go. A put credit spread does not need a rally - only the absence of a fall. Choosing the side is choosing which move you are confident cannot happen.

Worth naming. Credit spreads win often and lose several times what they win, so a long string of winners is the normal shape of a strategy that has not yet paid for itself. Judge one by expected value across many trades - credit against max loss and how often the short strike is breached - not by the hit rate. Assignment on the short leg is possible any time it is in the money, and the long leg protects the value but does not stop the shares arriving.

What this does not model

Every figure here is the payoff at expiry. Before then your position is marked at market prices that still carry time value, so a trade can show a loss while sitting exactly where you wanted it — falling implied volatility alone will do that.

Short legs carry assignment risk. American-style options can be exercised at any time, most commonly on in-the-money calls just before an ex-dividend date. The diagram assumes you hold every leg to expiry.

For the live version — real Greeks, current marks and what-if scenarios against actual chain data — that is what the GreeksView desk does, in your browser, on your own broker keys.

Frequently asked questions

What is a credit spread?

Selling one option and buying a cheaper, further-out option of the same type and expiry. The net premium is a credit you receive up front, and the long leg caps what the trade can lose.

Which is better, a put credit spread or a call credit spread?

Neither is better - they express opposite views. A put credit spread (bull put spread) profits while price stays above the short put; a call credit spread (bear call spread) profits while it stays below the short call. Choose the one whose losing direction you consider least likely.

How is a credit spread different from a debit spread?

A credit spread is paid up front and profits from time passing and the underlying going nowhere. A debit spread is paid for and needs the move to happen. Same four strikes can build either - the difference is which leg you sell.

What is a good return on risk?

There is no single number, because a higher credit means a higher chance of being breached. As a reference point, collecting about a third of the width puts the short strike near one standard deviation on most chains - richer credits mean a nearer, likelier strike.

Are commissions included in these numbers?

No — every figure is gross. On multi-leg positions this matters more than people expect: four legs to open and four to close is eight commissions against what may be a couple of hundred dollars of credit. Check your broker's per-contract rate against the max profit shown here before deciding a trade is worth putting on.

Run this against a live chain

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