Credit Spread Calculator

How it works

A credit spread sells one option and buys a further out-of-the-money option of the same type and expiry, collecting a net credit. A bull put spread (sell a higher-strike put, buy a lower-strike put) profits if the stock stays up; a bear call spread (sell a lower-strike call, buy a higher-strike call) profits if it stays down. Both have a defined max loss equal to the strike width minus the credit.

The number traders compare is return on risk: the credit divided by the capital actually at risk (the max loss), not the notional. The calculator finds the breakeven and max loss by walking the payoff line once, the same engine used for an iron condor (which is just two credit spreads). It shows profit and loss at expiration.

Worked example

Stock at $105. Bull put spread: sell the 100 put for $5 and buy the 95 put for $3 (one contract, multiplier 100):

• Net credit = 5 − 3 = $2/share = $200. That is your max profit.
• Strike width = 5, so max loss = (5 − 2) × 100 = $300 (capital at risk).
• Return on risk = 200 / 300 = 66.7%.
• Breakeven = 100 − 2 = $98; full profit if the stock expires at or above $100.

The formula

net credit     = premium sold − premium bought
max profit     = net credit × multiplier × contracts
max loss       = (strike width − net credit) × multiplier
return on risk = net credit / (strike width − net credit)
breakeven (bull put)  = short put strike  − net credit
breakeven (bear call) = short call strike + net credit

FAQ

What is return on risk?

The net credit divided by the capital actually at risk (the max loss = strike width minus credit). It is the figure that makes credit spreads comparable.

What is the difference between a bull put and bear call spread?

A bull put spread uses puts and profits when the stock stays up; a bear call spread uses calls and profits when it stays down. Both collect a net credit and have a defined max loss.

How do I calculate the breakeven?

For a bull put spread it is the short put strike minus the net credit; for a bear call spread it is the short call strike plus the net credit.

How do I calculate the max loss on a credit spread?

Max loss = (strike width − net credit) × multiplier × contracts. Sell a 100 put and buy a 95 put for a $2 credit: (5 − 2) × 100 = $300 at risk per contract. That max loss is also the capital your broker holds as collateral.

How do I close a credit spread?

Enter the opposite trade as one order: buy back the short leg and sell the long leg (a debit). Most traders close early once most of the credit is captured, or before expiry when the short strike is at risk, to avoid assignment. Letting both legs expire worthless keeps the full credit.

Does this include time value before expiry?

No, it shows profit and loss at expiration, which is exact. Pre-expiry pricing needs an option-pricing model and is a separate tool.