Debit
A debit is money that leaves your account, or more precisely, a transaction where you pay out more than you take in. If opening a position costs you cash upfront, that trade is "done for a debit."
In everyday brokerage use, you will see this word most in options trading. A debit spread means you pay a net premium to put the trade on: you buy an option and sell another option against it, but the option you buy costs more than the one you sell, so cash flows out of your account when you open it. Your maximum possible loss on that trade is generally limited to what you paid, since that's the most the position can cost you.
The nuance that trips people up is that "debit" describes the direction of cash flow at trade entry, not whether the trade is good or bad, and not the same thing as loss. You can open a position for a debit and still profit if the position gains value later. The opposite of a debit is a credit, where you receive cash upfront instead of paying it, such as when you sell an option and collect premium.
It also helps to separate this trading usage from the accounting sense of "debit," which just means an entry that increases certain kinds of accounts (like expenses or assets) and decreases others (like liabilities); traders mostly just need the simpler version: debit means cash out, credit means cash in.
Knowing whether a trade is a debit or credit tells a day trader upfront how much capital is tied up and, for many options structures, roughly what the maximum loss on that leg is.
A trader buys a call option for $2.50 and simultaneously sells a further out-of-the-money call for $1.00. The net cost to open the position is $1.50 per share, or $150 for one contract, paid out of the account. Because cash left the account to open it, this is a debit spread, and $150 is the most the trader can lose on it.
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