Credit

A credit is money that flows into your trading account as the result of a transaction, rather than money that flows out. If you sell something for more than it cost you to buy it, the difference lands in your account as a credit. The word is also used more broadly outside single trades: a broker might describe a deposit, a dividend payment, or a rebate as a credit to your account, meaning your balance goes up.

In the context of a single trade, the direction matters. Buying an asset is normally a debit — money leaves your account to pay for it. Selling it later, if the sale price is higher than what you paid, brings money back in as a credit, and the net effect across the two transactions is your profit. The same logic applies in options and spread trading, where a "credit trade" (like a credit spread) is one where you receive money upfront when you open the position, as opposed to a "debit trade" where you pay money upfront.

The nuance that trips people up is that "credit" describes the direction of cash flow, not automatically a profit. You can receive a credit on one leg of a trade and still lose money overall once the other leg (the debit) is accounted for, or once fees are subtracted. A credit spread, for example, gives you cash immediately, but that cash is often smaller than what you could lose if the trade moves against you — the upfront credit is not the same thing as the final result.

Traders also see "credit" used in the context of margin accounts, where a broker may extend credit — essentially lending money — to let a trader control a larger position than their own cash would allow. That is a different, though related, sense of the word: borrowed buying power rather than a cash inflow from a completed trade.