Net debit / net credit
Definition · Level 1 · Options basics
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The single price of a multi-leg order: a net debit when the legs cost you money in total, a net credit when they pay you.
Example
Buy back a call at 4.20, sell another at 3.20: a net debit of 1.00.
Where Tradecraft teaches it
Level 1 · Options basics, in the lesson “Managing a covered call: assignment, dividends & rolling”: Three endings: expire, get called away, or roll, and the dividend trap.
Related terms
- RollingClosing an existing option and opening a similar one at a later expiry (out) and/or a different strike (up or down), usually as one order.
- 0DTE“Zero days to expiration”: options on their final trading day.
- AM vs PM settlementWhether a cash-settled index option’s final value comes from opening prices on expiration morning (standard monthly SPX, last trade the day before)…
- American-styleExercisable on any business day up to and including expiration; the norm for US stock and exchange-traded fund (ETF) options.
- AssignmentNotice that an option you are short has been exercised, obliging you to sell (short call) or buy (short put) the stock at the strike.
- At the money (ATM)Strike equal, or nearest, to the current stock price; for a given expiry it usually carries the most extrinsic value.