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

    An options strategy involving the simultaneous purchase and sale ...
  2. Diagonal Spread

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  3. Option Series

    A specific set of calls or puts on the same underlying security, ...
  4. Long Jelly Roll

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  5. Expiration Date (Derivatives)

    The last day that an options or futures contract is valid. When ...
  6. In The Money

    1. For a call option, when the option's strike price is below ...
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