Formula reference
Credit spread maximum loss: the formula
A credit spread's maximum loss equals the distance between its two strikes, multiplied by 100 shares per contract, minus the net credit collected. This is the same formula whether the position is a bull put spread or a bear call spread, and it is fixed the moment the trade is opened, no matter how far the stock ultimately moves against it.
By Option Ideas Editorial Team · Published September 2, 2026
The formula
- Max loss
- (Strike width × 100) − net credit received.
- Max profit
- The net credit received, in full.
- Strike width
- The dollar distance between the short strike and the long strike.
- Capital required
- Equal to the max loss -- that's the number a broker holds as margin for a defined-risk credit spread.
Worked example: a bull put spread
Illustrative numbers, not live quotes -- for that, see the real, current option chain on the ideas page.
| Stock trading at | $100 |
| Sell | 1x $95 put for $2.50 |
| Buy | 1x $90 put for $1.00 — net credit $1.50 ($150) |
| Width | $5 × 100 = $500 |
| Max loss | $500 − $150 = $350, if the stock closes at or below $90 |
| Max profit | $150, if the stock closes at or above $95 |
| Breakeven | $95 − $1.50 = $93.50 |
Risks and assumptions
- The maximum loss is the realistic worst case for the position, but it can still be a large multiple of the credit collected -- size the trade by what you could lose, not by what you collect.
- Early assignment on the short leg (especially near a dividend date, for calls) can disrupt the position before expiration, though the long leg still caps the eventual loss.
- This formula assumes both legs expire or are closed together. Closing only one leg early turns a defined-risk position into an undefined-risk one.
FAQ
Does the formula change between a bull put spread and a bear call spread?
No. Both are credit spreads with the same shape: sell the strike closer to the stock price, buy a further strike as protection. Width minus credit is the max loss either way.
Why is capital required usually shown as equal to the max loss?
Because a defined-risk credit spread's broker margin requirement is typically set at the worst case the position can produce -- the same number as its maximum loss.
What's the maximum profit on a credit spread?
The net credit received, in full, if both legs expire worthless (or are closed at zero).
Primary references
Not hyperlinked deliberately -- verify current material directly on each organization's own site.
- The Options Clearing Corporation (OCC)
- Cboe Options Institute