Vertical

A vertical is a two-legged option trade: you buy one option and sell another option of the same type (both calls or both puts) and the same expiration date, but at different strike prices. "Vertical" refers to the fact that on an option chain, strikes are listed in a column and expirations run across in rows — so a trade that combines different strikes at the same expiration moves "vertically" down that column, as opposed to a "horizontal" spread, which keeps the same strike but uses different expirations.

The point of pairing a long option with a short option is to change the cost and risk profile compared to holding either option alone. Buying a single call or put means paying a premium with theoretically large (calls) or large but capped (puts) profit potential, but the whole premium is at risk and time decay works against you. Selling the second option against it brings in premium that offsets some of that cost, which lowers your maximum loss and your breakeven point, at the price of also capping your maximum possible gain.

There are four basic versions: bull call spread and bear put spread (net debit, meaning you pay to enter, used when you expect the price to move in your favor), and bull put spread and bear call spread (net credit, meaning you receive money to enter, used when you expect the price to stay above or below a level). "Bull" and "bear" describe the market direction the trade profits from, not which option you bought versus sold.

The nuance beginners trip over is that a vertical's maximum profit and maximum loss are both fixed and known before you enter the trade — the width between the two strikes, multiplied by the option's contract multiplier, sets the outer boundary of both. People sometimes assume selling an option "for income" inside a vertical is safe because the long option protects them, and that protection is real, but it also means giving up any profit beyond the strike width, so the trade is a defined-risk, defined-reward position rather than a bet with open-ended upside like a single naked option purchase.