Unit 3: Multiple Option Strategies Flashcards
spread
purchase of one option and sale of another option of the same class (ex: call spread and put spread)
call spread
long call and short call
put spread
long put and short put
price spread (vertical spread)
only difference is strike price
time spread (calendar/horizontal spread)
only difference is expiration date
diagnol spread
difference in both strike price and expiration date
Spreads - Bulls buy
calls and call spreads
Spreads - Bears buy
puts and put spreads
Spreads - Bulls sell
puts and put spreads
Spreads - Bears sell
calls and call spreads
net credit
opening transactions result in money flowing into account (sold the spread)
net debit
opening transactions result in money flowing out of account (bought the spread)
Bull spreads
Debit call spreads
Credit put spreads
Bear spreads
Debit put spreads
Credit call spreads
If no premiums are shown, highest premium will be
calls with lower strike price
puts with higher strike price
Debit call spreads (long call spreads)
Buys the call with the lower strike price and sells the call with the higher strike price
Debit put spreads (long put spreads)
Buys the put with the higher strike price and sells the put with the lower strike price
Credit call spreads (short call spreads)
Buys the call with the higher strike price and sells the call with the lower strike price
Credit put spreads (short put spreads)
Buys the put with lower strike price and sells the put with the higher strike price
spread
difference between the premium of the two options