Buy A Spread


DEFINITION of 'Buy A Spread'

Option strategy that will be profitable if the underlying security rises in value moderately. A bull spread can be executed either by put or call options. If the bull spread is executed through a put option, it is called a bull put spread. If it is executed through a call option, it is called a bull call spread. Buying a spread is also known as a "bull spread"


Both bull call spreads and bull put spreads are common vertical spread options strategies. A bull call spread involves buying a call option with a lower exercise price and premium than the option that will be sold. For example, if you buy a call option for stock XYZ at a strike price of $60 and a premium of $200, you will get a bull spread if you sell a call on the same stock with a $70 strike price and a premium of $100. With bull call spreads, it is necessary that both call options have the same expiration date.

  1. Long Leg

    The part of an option spread strategy that involves buying an ...
  2. Put Option

    An option contract giving the owner the right, but not the obligation, ...
  3. Strike Price

    The price at which a specific derivative contract can be exercised. ...
  4. Vertical Spread

    An options trading strategy with which a trader makes a simultaneous ...
  5. Bull Market

    A financial market of a group of securities in which prices are ...
  6. Call Option

    An agreement that gives an investor the right (but not the obligation) ...
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  1. How is a put option exercised?

    A put option is a contract that gives the option holder the right, but not obligation, to sell a set amount of shares (1 ... Read Full Answer >>
  2. When does one sell a put option, and when does one sell a call option?

    The incorporation of options into all types of investment strategies has quickly grown in popularity among individual investors. ... Read Full Answer >>
  3. How do hedge funds use equity options?

    With the growth in the size and number of hedge funds over the past decade, the interest in how these funds go about generating ... Read Full Answer >>
  4. Can mutual funds invest in options and futures?

    Mutual funds invest in not only stocks and fixed-income securities but also options and futures. There exists a separate ... Read Full Answer >>
  5. How does a forward contract differ from a call option?

    Forward contracts and call options are different financial instruments that allow two parties to purchase or sell assets ... Read Full Answer >>
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    The term delta refers to the change in price of an underlying stock or exchange-traded fund (ETF) as compared to the corresponding ... Read Full Answer >>

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