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Money comes in.

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Is that always better?

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Sometimes paying first fits the plan better.

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Money received at entry is called credit.

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Money paid at entry is called debit.

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Today, we build four simple two-option spreads.

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Our index prices and premiums are made up.

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We use sixty five units on each leg.

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That is an example quantity, not a current rule.

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Every result is before charges and execution costs.

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A vertical spread buys one option and sells another.

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Use two calls, or use two puts.

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Both must be on the same index.

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Their expiry date must match.

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Use equal units, but different strikes.

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Keep both legs intact for the stated expiry limits.

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Bullish simply means expecting the index to go up.

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Bearish means expecting it to go down.

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Choose for the view and the loss you can afford.

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Receiving money does not make one choice better.

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First, the bull put spread.

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Sell the twenty four thousand eight hundred put.

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Receive ninety rupees per unit.

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Buy the twenty four thousand six hundred put.

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Pay fifty rupees per unit.

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Ninety minus fifty leaves forty rupees per unit.

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The strikes are two hundred points apart.

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At expiry, settlement at or above twenty four thousand eight hundred needs no put payment.

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The forty rupees remain as profit before costs.

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Across sixty five units, that is two thousand six hundred rupees.

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Now suppose expiry settlement is twenty four thousand seven hundred.

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The sold put needs one hundred rupees per unit.

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The lower bought put pays nothing here.

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Forty minus one hundred means a sixty rupee loss.

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At or below twenty four thousand six hundred, the net payment reaches two hundred.

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After our forty credit, the loss is one hundred sixty per unit.

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For sixty five units, maximum expiry loss is ten thousand four hundred rupees.

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Breakeven is twenty four thousand seven hundred sixty.

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That means no profit or loss before costs.

40
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These profit and loss amounts do not tell us the chance of winning.

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For a down view, try a bear call spread.

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Sell the twenty five thousand two hundred call for ninety five rupees.

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Buy the twenty five thousand four hundred call for fifty five.

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Again, forty rupees per unit remain.

45
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At expiry, at or below twenty five thousand two hundred, keep that credit.

46
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At twenty five thousand three hundred, the sold call needs one hundred.

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The bought call pays nothing.

48
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Our loss is sixty per unit.

49
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At or above twenty five thousand four hundred, the net payment is two hundred.

50
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The same maximum loss is ten thousand four hundred rupees.

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Maximum profit is two thousand six hundred.

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Breakeven is twenty five thousand two hundred forty.

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The higher bought call provides protection, not another put.

54
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Now pay for an up view: a bull call spread.

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Buy the twenty five thousand call for one hundred fifty rupees.

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Sell the twenty five thousand two hundred call for seventy.

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One hundred fifty minus seventy means eighty rupees paid per unit.

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Eighty times sixty five means five thousand two hundred paid.

59
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At expiry, at or below twenty five thousand, neither call pays.

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The whole debit is lost: five thousand two hundred rupees.

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At twenty five thousand one hundred, the bought call pays one hundred per unit.

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The sold call needs nothing here.

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Subtract the eighty paid.

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Twenty rupees per unit remain as profit.

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At or above twenty five thousand two hundred, the spread pays two hundred per unit.

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Both call values grow together after the higher strike.

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Two hundred minus eighty gives one hundred twenty profit per unit.

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For sixty five units, maximum profit is seven thousand eight hundred rupees.

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Breakeven is twenty five thousand eighty.

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That is the bought strike plus eighty paid.

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Selling the upper call reduces entry cost, but limits further expiry gains.

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A smaller entry payment does not automatically mean a better trade.

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For a down view, pay for a bear put spread.

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Buy the twenty five thousand put for one hundred fifty rupees.

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Sell the twenty four thousand eight hundred put for seventy.

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Again, pay eighty per unit, or five thousand two hundred total.

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At or above twenty five thousand at expiry, the whole debit is lost.

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At twenty four thousand nine hundred, the bought put pays one hundred.

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The sold put needs nothing.

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Subtract eighty paid, leaving twenty rupees profit per unit.

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At or below twenty four thousand eight hundred, the spread pays two hundred.

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After the debit, maximum profit is seven thousand eight hundred across our units.

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Breakeven is twenty four thousand nine hundred twenty.

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The lower sold put reduces cost and caps further gains.

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Before expiry, use prices for closing the whole spread.

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Suppose our eighty rupee debit spread closes for one hundred ten.

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One hundred ten minus eighty leaves thirty rupees per unit.

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Across sixty five units, profit is one thousand nine hundred fifty rupees.

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Instead, a forty credit spread closes for seventy.

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Forty minus seventy loses thirty per unit.

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That loses one thousand nine hundred fifty rupees before costs.

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Use actual fills or available whole-spread quotes, not old last prices.

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If protection has no usable price, skip the entry.

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Do not sell first and hope to find protection later.

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First, credit means money received.

96
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Debit means money paid.

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Second, bought and sold legs work together at expiry.

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Third, check the whole position, its loss, and its closing cost.

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The stated limits need matched legs kept intact.

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Costs are extra.

101
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Profit is never promised.

102
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Next, we manage a trade that moves against us.

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Can a new trade erase an old loss?