Debit spreads refer to positions in which you pay more premium for the long options than you collect for the short ones. These spreads often make sense, because they are more conservative: Risk is limited to the amount paid.

All debit spreads benefit from the short options time decay, which helps offset the long options loss of time value. As expiration approaches, the short options time value decreases, which helps the spread. This discussion explores how to use debit spreads in all types of markets: bullish, bearish, and neutral.