Buy A Spread

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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"







BREAKING DOWN 'Buy A 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.





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RELATED FAQS
  1. 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 >>
  2. 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 >>
  3. 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 >>
  4. What are common delta hedging strategies?

    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 >>
  5. How do I determine the breakeven point for a short put?

    The breakeven point for a short put is the strike price of the option minus the premium. Selling puts is a way for traders ... Read Full Answer >>
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