Vertical Spread

AAA

DEFINITION of 'Vertical Spread'

An options trading strategy with which a trader makes a simultaneous purchase and sale of two options of the same type that have the same expiration dates but different strike prices.

INVESTOPEDIA EXPLAINS 'Vertical Spread'

Profits are determined by the widening or narrowing of the difference between the option premiums on the two positions.

RELATED TERMS
  1. Bull Call Spread

    An options strategy that involves purchasing call options at ...
  2. Horizontal Spread

    An options strategy involving the simultaneous purchase and sale ...
  3. Frontspread

    A type of options spread in which a trader holds more short positions ...
  4. Bear Spread

    1. An option strategy seeking maximum profit when the price of ...
  5. Spread Option

    A type of option that derives its value from the difference between ...
  6. Expiration Date (Derivatives)

    The last day that an options or futures contract is valid. When ...
Related Articles
  1. Options & Futures

    Options Basics Tutorial

    Discover the world of options, from primary concepts to how options work and why you might use them.
  2. Options & Futures

    Vertical Bull and Bear Credit Spreads

    This trading strategy is an excellent limited-risk strategy that can be used with equity as well as commodity and futures options.
  3. Options & Futures

    Top Brokers Offering Tools For Covered Calls

    Here are the brokers that offer the best tools for investors and traders to write covered calls and covered puts.
  4. Economics

    Effects of OIS Discounting for Derivative Traders

    The use of OIS discounting has important implications for derivative valuations and could positively or negatively impact a trader's profit or loss.
  5. Options & Futures

    The Perks of Trading Coffee Options

    As more people begin to trade coffee, we explain how coffee options work, who uses them, what drives valuations, and the risks and rewards.
  6. Trading Strategies

    Top Day Trading Instruments

    Day trading is an intense and often appealing activity. Investopedia provides the list of top financial instruments for day trading.
  7. Options & Futures

    Give Yourself More Options With Real Estate Options

    Real estate options have many benefits, including a smaller initial capital requirement.
  8. Options & Futures

    The Fancy Way To Diversify Your Portfolio: Precious Metal Options

    A guide with strategies on how to invest or trade in precious metals by using options.
  9. Options & Futures

    When And How To Take Profits On Options

    Here are the different criteria to ensure maximum profit taking while trading options.
  10. Options & Futures

    The Future Is Now: All About Futures ETFs

    A new security class - futures ETFs - is gaining popularity. We tell you how futures ETFs work and offer tips.

You May Also Like

Hot Definitions
  1. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  2. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  3. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  4. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  5. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  6. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
Trading Center