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, since 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, so 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.