A multi-leg trade where you pay out more than you take in; cash leaves the account and the debit is usually the maximum loss.
In a defined-risk debit structure, what you paid is what you can lose. That makes sizing trivial: the debit times the options-multiplier times the number of contracts is the entire risk, assuming you hold to expiration.
Debit structures generally need the underlying to move to pay off, since you start behind by the amount paid. They are long extrinsic-value, so theta works against you and rising implied-volatility helps.
Example: buy the XYZ $50 call at $2.30 and sell the $55 call at $0.80 for a $1.50 net debit, $150 per spread. That $150 is the maximum loss. Maximum gain is the $5 width minus the $1.50 debit, or $350, reached above $55.
Original diagrams for the ideas on this page. Illustrative, not real market data.
The bid-ask spread. Buy orders sit below, sell orders above, and the gap between the best bid (50.01) and best ask (50.04) is the spread you pay to cross. Bar length shows the size resting at each price.Buying a call: payoff at expiry. A 105-strike call bought for 3 loses that whole 3 if the price finishes at or below 105, breaks even at 108, then gains a dollar for every dollar higher. The loss is capped at the premium; the upside is not capped.
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