A debit spread (bull call, bear put) pays premium upfront and profits from direction; max loss is the debit. A credit spread (bull put, bear call) collects premium and profits from range or the status quo; max loss is width minus credit. Credit spreads have higher win rates but smaller payoffs; debit spreads need a bigger move but pay more.
The AI filter picks structure by regime: debit spreads in confirmed directional moves (P in safe band, VIX calm), credit spreads in range/neutral regimes. Never sell naked; always define risk with the long wing. Size by the defined max loss, not notional.
Q: What is a debit spread?
A: Pay premium; profits from direction; max loss is the debit.
Q: What is a credit spread?
A: Collect premium; profits from range; max loss is width minus credit.
Q: Which wins more often?
A: Credit spreads usually have higher win rate, smaller payoff.
Q: How does the model choose?
A: Directional confirmed move -> debit; range -> credit; always defined-risk.
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By Shakti Tiwari · Options AI research pillar. NISM XII certified. Educational only, not investment advice; verify before acting.