Quick definition
A vertical spread entered for a net debit — the trader pays premium at entry. Debit spreads are defined-risk long-premium directional structures used when a specific move is expected.
When they shine
Debit spreads perform best when IV is moderate to low — cheaper premium to buy, less headwind from vol contraction. They are also natural in scenarios where a specific directional move is expected within a specific window: earnings, catalysts, technical breakouts. The bounded downside makes them safer than naked long options, which have to fight both theta and vega.
Payoff and probability
Debit spreads typically have lower probability of profit than credit spreads but better payoff ratios — you risk one to make two or three. That trade-off inverts the credit-spread math. A trader who alternates between debit and credit spreads by IV regime is running a coherent volatility-adjusted directional book.
How Treeova uses it
Debit-spread agents on Treeova pair the directional thesis with Arch-AGI's conviction score — a spread is entered only when the directional signal and the vol regime both align. Expected value is computed explicitly against modeled IV and time to expiration, so the trade-off between probability and payoff is a first-class input rather than a hunch.