An option spread is the position that is entered when the investor purchases and sells (writes) equal numbers of the same kind of options with the same underlying security. However, the strike prices and expiration dates of these options differ depending on the type of spread. The bull put spread options strategy is also known as the bull put credit spread as a credit is received upon entering the trade.
Options spreads are broken up to three distinct categories, including the flat disperse, the perpendicular spread, and also the angled disperse. The options are categorized according to strike price and expiry dates. Apartment spreads will also be called calendar or period spreads. These forms of spreads contain options with exactly the exact same inherent security and attack rates. The options within this category possess different expiry dates, even though.
Vertical spreads will also be referred to as currency spreads. These ranges include options using exactly the exact same inherent security and expiry month. Diagonal spreads include some form of combination of their horizontal and vertical disperse classification. They’re called diagonal spreads since they’re a mixture of horizontal and vertical spreads.
Within these 3 spreads classes, spreads can also be categorized by the things they have been intended to complete. A telephone or put spread is merely a spread that’s made from call options or put options. When the spread is produced from telephone options, it’s called a call distributed. When a propagate is produced from put options, it’s called being a put spread.
Bull and bear spreads are the ones which are produced to gain from an increase or decrease in price of the underlying security. Bull spreads gain from an increase in price, and keep spreads are more profitable once the price declines.
Credit and debit spreads are created based on premiums of the options. A net credit is received when the premiums of the options sold is higher than the premiums of the options purchased. A spread created from these types of transactions is called a credit spread. A net debit is taken by the investor when the premium of options sold is lower than the premium of the options purchased. A spread created from this scenario is known as a debit spread.