💸 Initial Cost

The initial cost of a multi-leg strategy is the net premium required to enter the position. It reflects the combined cost of buying and selling multiple options contracts, and determines whether the strategy is entered for a net debit (you pay) or net credit (you receive).

🧮 How It's Calculated

Net Debit: Total premiums paid − total premiums received
Net Credit: Total premiums received − total premiums paid
Commissions and bid-ask spreads may affect the actual execution cost

📘 Example: Bull Call Spread

Buy 1 Call @ $100 strike → Premium = $5.00
Sell 1 Call @ $110 strike → Premium = $2.00
Initial Cost: $5.00 − $2.00 = $3.00 (Net Debit)

📊 Strategy Types

Strategy	Initial Cost Type	Market Outlook
Vertical Spread	Debit or Credit	Directional (bullish/bearish)
Iron Condor	Net Credit	Neutral
Straddle	Net Debit	Volatile (unknown direction)
Calendar Spread	Net Debit	Neutral or directional

🧠 Pro Tip

The initial cost determines your maximum loss in debit strategies and your maximum gain in credit strategies. Always factor in execution quality, slippage, and margin requirements when evaluating trade setup.