Vertical Spread

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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. Bear Spread

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

    1. The difference between the bid and the ask price of a security ...
  3. Horizontal Spread

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  5. Bull Vertical Spread

    An bullish strategy used by investors who feel that the market ...
  6. Bull Spread

    An option strategy in which maximum profit is attained if the ...
RELATED FAQS
  1. What is the difference between in the money and out of the money?

    In options trading, the difference between "in the money" and "out of the money" is a matter of the strike price's position ... Read Full Answer >>
  2. If a long call is owned on the record date of a stock, is the owner of the option ...

    The owner of a long call for a stock is entitled to a dividend only if the option is exercised prior to the ex-dividend date, ... Read Full Answer >>
  3. How can an investor profit from the cyclical nature of the electronics sector?

    An investor can profit from the cyclical nature of the electronics sector in two ways. He can employ sector rotation, shifting ... Read Full Answer >>
  4. What does negative vega mean for credit spreads?

    Greek vega measures an option's sensitivity with respect to a change in the underlying asset's volatility. The vega of an ... Read Full Answer >>
  5. What options strategies are best suited for investing in the banking sector?

    The covered call option strategy allows investors to profit from the banking sector's stability and its track record for ... Read Full Answer >>
  6. What options strategies are best suited for investing in the drugs sector?

    The covered call and long straddle options strategies enable investors to capitalize on the unique characteristics of the ... Read Full Answer >>
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