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Spread option strategies involves buying or selling two or more Options. There are numerous combinations of spreads; some more common ones include credit spreads (selling an option closer to the money and then buying one further away), debit spreads (buying an option nearer to the money and selling one further away) and calendar spreads where the Long and Short Options are in different months.

Spread option strategies are usually composed of a Long and Short position. The differential between both defines the spread and helps to minimise the risk for a trader, but also reduces the maximum profit that can be obtained.
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Contributed by: Ralph Windsor

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Introductory article explaining different types of Options spread strategies.

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View Options Investor in Options Market Glossary Directory


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