Option Spreads

Written by Joy MacKay
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One of the most important parts of option trading is the use of option spreads. At the time you purchase an option, you pay a premium. The money you make or lose will end up being the difference between this premium and the value it ultimately yields.

An option spread is a position consisting of two or more options on a single underlying stock.. Generally, spreads consist of one long and one short position. There are different types of option spreads. For instance, when a call is purchased at a certain strike price and another call sold at a higher strike price in the same expiration month, it is called a "vertical spread."

A vertical spread makes the maximum profit if the underlying stock closes above the upper strike price when the options expire. Oftentimes, a profit can be made with a vertical spread even if the underlying stock does not go up in price.

Finding Option Spreads Info Online

The Internet is a great resource for finding quality information on option spreads. With a plethora of sites catering to stock option information and specifically option spreads information, you can get all the information you need from the comfort of your own home. Get started searching today and find the information you need to make a profit.


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