Quick Answer
All four vertical spreads follow one rule: max gain plus max loss always equals the spread width. Debit spreads (bull call, bear put) want the options exercised; credit spreads (bear call, bull put) want them to expire worthless. The CAL/PUSH mnemonic below covers every breakeven formula in one phrase.
With all four vertical spreads covered, here is a single reference table comparing them side by side. This table covers each spread's direction, cash flow, and profit/loss boundaries.
How Do All Four Vertical Spreads Compare at a Glance?
| Strategy | Type | Outlook | Max Gain | Max Loss | Breakeven |
|---|---|---|---|---|---|
| Bull call spread | Debit | Bullish | (High - Low) - Debit | Debit | Low strike + Debit |
| Bear call spread | Credit | Bearish | Credit | (High - Low) - Credit | Low strike + Credit |
| Bear put spread | Debit | Bearish | (High - Low) - Debit | Debit | High strike - Debit |
| Bull put spread | Credit | Bullish | Credit | (High - Low) - Credit | High strike - Credit |
What Is the CAL/PUSH Breakeven Memory Aid?
Memorize one phrase and you cover all four vertical-spread breakevens:
- CAL = Call Add Lower → For any call spread, add the net premium to the lower strike
- PUSH = Put sUbtract Higher → For any put spread, subtract the net premium from the higher strike
Works whether the spread is debit or credit. The "net premium" is the debit you paid or the credit you received: just plug in the absolute value.
| Spread | Formula | Example |
|---|---|---|
| Bull call (debit) | Lower strike + debit | 50/60 call spread, $3 debit → BE = $53 |
| Bear call (credit) | Lower strike + credit | 70/80 call spread, $5 credit → BE = $75 |
| Bear put (debit) | Higher strike - debit | 80/90 put spread, $4 debit → BE = $86 |
| Bull put (credit) | Higher strike - credit | 65/75 put spread, $5 credit → BE = $70 |
What Key Patterns Apply Across All Vertical Spreads?
- Debit spreads: The investor wants options to be exercised, which requires significant price movement in the expected direction
- Credit spreads: The investor wants options to expire worthless, profiting from time decay and limited price movement
- In all vertical spreads: Max gain + Max loss = Spread width (the difference between strike prices)
This last point works as a built-in error check. If max gain and max loss do not add up to the difference between the two strikes, something went wrong in the calculation.
How Do You Remember Debit vs. Credit Spreads?
| Feature | Debit Spread | Credit Spread |
|---|---|---|
| Cash flow at opening | Pay net premium (cash out) | Receive net premium (cash in) |
| Wants movement? | Yes (needs price to move) | No (wants price to stay put) |
| Time decay effect | Works against the position | Works in favor of the position |
| Max loss = | Premium paid | Spread width - Premium received |
| Max gain = | Spread width - Premium paid | Premium received |
Think of it this way: Debit spreads are like buying insurance: you pay upfront and need something to happen (price movement) to collect. Credit spreads are like selling insurance: you collect a premium upfront and hope nothing happens (options expire worthless).
Exam Tip: Gotchas
- Net cash flow decides debit or credit: a net payment makes it a debit spread, a net receipt makes it a credit spread. The option with the higher premium determines the direction of cash flow.
- Max gain + max loss must equal the spread width. If they do not, go back and recheck the calculation.
What Should You Check on Exam Day?
- Recall the CAL/PUSH mnemonic first if you blank on a formula: call spreads add to the lower strike, put spreads subtract from the higher strike
- Use "max gain + max loss = spread width" to check any spread calculation before submitting an answer
- Confirm whether the question describes a debit (wants movement) or credit (wants stillness) position before picking a breakeven direction