Quick definition
A two-leg options position built from a long option and a short option on the same underlying and expiration but different strikes. Vertical spreads have defined risk and defined reward.
The four variants
Bull call spread: long lower-strike call, short higher-strike call — debit, bullish. Bear call spread: short lower-strike call, long higher-strike call — credit, bearish. Bull put spread: short higher-strike put, long lower-strike put — credit, bullish. Bear put spread: long higher-strike put, short lower-strike put — debit, bearish. Every trader should be able to draw these four payoffs from memory.
Debit vs credit
Debit spreads pay for a directional view — max loss is what you paid, max win is the strike width minus what you paid. Credit spreads sell a directional view — max win is what you collected, max loss is the strike width minus what you collected. Credit spreads have higher probability of profit but worse payoff ratios; debit spreads flip that trade-off.
How Treeova uses it
Vertical spreads are the most common leg pattern inside Treeova agents because their bounded risk plays cleanly with the Adaptive Risk Engine's sizing model. Iron condors, butterflies, and calendar structures on the platform are all composed from vertical spreads underneath, letting the risk engine reason about each leg pair independently.