debit spread(redirected from Debit spreads)
An option strategy in which one buys an option for a higher premium and sells another option on the same underlying asset at a lower premium. One profits from a debit spread when there is a large change in the price of the underlying asset that will increase the value of the option with the higher premium; the option with the lower premium hedges the investor's risk.
The simultaneous sale of one option and purchase of another option that results in a debit to the investor's account. Thus, more funds are required for the purchase than are received from the sale. An example is the purchase of a 6-month call at a price of $500 and the simultaneous sale of a 3-month call at the same strike price for $300. This trade results in a debit of $200 plus commissions to the investor's account. Compare credit spread.