Vertical Spread

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.

BREAKING DOWN 'Vertical Spread'

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

RELATED TERMS
  1. Horizontal Spread

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  2. Diagonal Spread

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  3. Bear Spread

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RELATED FAQS
  1. How are call options priced?

    Learn how aspects of an underlying security such as stock price and potential for fluctuations in that price, affect the ... Read Answer >>
  2. How do I change my strike price once the trade has been placed already?

    Learn how the strike prices for call and put options work, and understand how different types of options can be exercised ... Read Answer >>
  3. Do options make more sense during bull or bear markets?

    Understand how options may be used in both bullish and bearish markets, and learn the basics of options pricing and certain ... Read Answer >>
  4. How do I set a strike price in an options spread?

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  5. How can derivatives be used to earn income?

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