Credit Spread

What Does Credit Spread Mean?
1. The spread between Treasury securities and non-Treasury securities that are identical in all respects except for quality rating.

2. An options strategy where a high premium option is sold and a low premium option is bought on the same underlying security.

Investopedia explains Credit Spread
1. For instance, the difference between yields on treasuries and those on single A-rated industrial bonds. A company must offer a higher return on their bonds because their credit is worse than the government's.

2. An example would be buying a Jan 50 call on ABC for $2, and writing a Jan 45 call on ABC for $5. The net amount received (credit) is $3. The investor will profit if the spread narrows.

Can also be called "credit spread option" or "credit risk option".