If you’ve ever been told that credit spreads are “for income” and debit spreads are “for speculation,” you’re not alone. It’s one of the most common pieces of options trading advice out there.
But here’s the problem: it’s completely wrong.
And the truth is, understanding the real mechanics behind spreads can open up a whole new level of control in your trading — without changing a single ticker.
Most traders believe credit spreads are how you “collect income,” and debit spreads are for “making directional bets.” But that’s not how spreads actually work.
The reality is: both types of spreads behave the same — if you place them correctly.
Let’s say SPY is trading at $559. If I buy the $558 Call, sell the $559 Call, and pay $0.68… that’s a debit spread. But guess what? If SPY stays above $559, I collect the full $1 value of that spread. That’s a 47% return overnight.
If I were to do the credit spread version of this trade, I could sell the $559 Put and buy the $558 Put.. I would collect $0.32 and if the SPY finishes above $559, I make 47%…
Folks, it’s the same trade.
It doesn’t matter if it is structured as a debit spread or a credit spread.
So what’s really going on here?
It’s not whether you pay or collect premium that matters — it’s where price is relative to your strikes. If the price is already above your call spread, or below your put spread, you’re collecting time decay whether it’s a debit or credit.
That means you can structure debit spreads like income trades — and get all the same benefits with less risk of early assignment and easier math on your exits.
And that’s exactly what I’ve been doing.
Just last week, I entered a quick Overnight Options trade on SPY: bought the $558 call, sold the $559 call, and paid $0.68. The next morning, price was above $559 so the time decay was working in my favor.
I exited at $0.84 for a clean, quick profit — Now I might not have “collected premium” because it I paid a debit and sold it before, but the trade functioned exactly the same: As long as price was above my spread, value was being added to my trade.
The idea that credit spreads = income and debit spreads = risk is just not accurate. Both are just tools. And when you understand how they really function — how to position them relative to price — you’ll realize how much variation you have to play with too!
It’s not about what you pay or collect. It’s about how you structure the trade and the risk/reward scenarios you create.
— Nate Tucci
P.S. Want to learn more about how I build Overnight Options trades like this?
