Q:
Which of the following is a horizontal spread?
a) Buy 1 FBN Aug 50 Call; Long 1 XYZ Aug 50 Put
b) Write 1 PDQ Feb 35 Call; Buy 1 PDQ Apr 45 Call
c) Short 1 XYZ Mar 30 Put; long 1 XYZ Nov 30 Put
d) Long 1 ABC Jan 50 Call; short 1 ABC Jan 60 Call
A:

The correct answer is c.
A horizontal spread is also called a time spread or a calendar spread. The terms of the two contracts are identical except for the expiration date. This strategy is called horizontal because the expiration dates are arrayed horizontally in newspaper quotes. Therefore, the correct answer is c: "Short 1 XYZ Mar 30 Put; long 1 XYZ Nov 30 Put".

The remaining options are incorrect because:
1) "Long 1 ABC Jan 50 Call; short 1 ABC Jan 60 Call" is a vertical or price spread
2) "Buy 1 FBN Aug 50 Call; Long 1 XYZ Aug 50 Put" is a long straddle.
3) "Write 1 PDQ Feb 35 Call; Buy 1 PDQ Apr 45 Call" is a diagonal spread.


RELATED FAQS

  1. Just prior to the close of the markets on the final trading day before expiration ...

    The correct answer is d. The investor opened the spread strategy with a net debit of $600. When he/she closes the 40 call ...
  2. What is the difference between a long position and a call option?

    Learn what a long position in a stock is, what a call option is, and the difference between owning shares of a company and ...
  3. How do I set a strike price in an options spread?

    Find out more about option spread strategies, and how to set the strike prices for bull call spreads and bull put spreads ...
  4. What is the average debt/equity ratio for the Internet sector?

    Learn about how debit option spreads work, including their maximum profit and loss, and understand how time decay impacts ...
  5. How can I use an out-of-the-money put time spread for downside risk?

    Learn how using an out-of-the-money time put spread can be used to hedge downside risk by reducing the amount of premium ...
  6. How do traders use debit spreads to protect against loss?

    Review an example of how a trader might use a debit spread to limit the maximum loss on an options transaction, limiting ...
RELATED TERMS
  1. Buy A Spread

    Option strategy that will be profitable if the underlying security ...
  2. Long Leg

    The part of an option spread strategy that involves buying an ...
  3. Bull Call Spread

    An options strategy that involves purchasing call options at ...
  4. Diagonal Spread

    An options strategy established by simultaneously entering into ...
  5. Horizontal Spread

    An options strategy involving the simultaneous purchase and sale ...
  6. Calendar Spread

    An options or futures spread established by simultaneously entering ...
Hot Definitions
  1. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  2. Down Round

    A round of financing where investors purchase stock from a company at a lower valuation than the valuation placed upon the ...
  3. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  4. Portfolio Investment

    A holding of an asset in a portfolio. A portfolio investment is made with the expectation of earning a return on it. This ...
  5. Treynor Ratio

    A ratio developed by Jack Treynor that measures returns earned in excess of that which could have been earned on a riskless ...
  6. Buyback

    The repurchase of outstanding shares (repurchase) by a company in order to reduce the number of shares on the market. Companies ...
Trading Center