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What are different types of options spreads?


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An option spread is a simultaneous Buy and Sell of options on the same underlying asset. The strike prices and expiry dates may be different for such spreads.

Option spread types

  1. Call and Put spread: Most spreads use either call or put options. Both options are either call options or put options. A spread that consists only of calls is called a Call Spread, while a spread that consists only of puts is called a Put Spread.
  2. Credit and Debit spread strategy: Spreads can also be classified based on the capital investment. When you create one you will either incur upfront costs or receive an upfront credit. If you incur upfront costs because you spend more to buy contracts than you receive by signing them, this is called a debit spread. If you receive an upfront credit because you spend less on buying contracts than you receive by signing them, this is called a credit spread.
  3. Calendar spread strategy: A calendar spread is the sale of an option (either call or put) with a short-term expiration date and the simultaneous purchase of an option (call or put) with a longer-term expiration date. Both options are of the same type and usually have the same strike price.
  4. Vertical, Horizontal, and Diagonal spread: Spreads that involve the purchase and sale of contracts of the same type, expiration date, and underlying but with different strike prices are called vertical spreads. The purchase and sale of contracts with different expiration dates but the same type, strike price, and underlying are referred to as horizontal spread option strategy. The purchase and sale of options with different strike prices and different expiry dates but the same type and the same underlying are referred to as diagonal spread strategies.
  5. Ratio spread: This applies to any spread where different quantities of options contracts are bought and sold, as opposed to buying a quantity of contracts equal to the quantity written. Usually, more contracts are written than bought, but the ratio can work both ways depending on which strategy is used.


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