Continue reading...Today I’d like to talk about a strategy called the Vertical Spread. For those of you who are wondering how the terms Horizontal and Vertical came into common usage, ponder no more. In a typical options chain or montage, the options are typically displayed in the format shown here. Calendar months listed horizontally and strike prices listed vertically!
As I typically like to do, let’s start out with a definition.
Definition: A Vertical Spread is an options strategy in which options are bought and an equal number of options of the same type (Puts or Calls) are sold with different strike prices, but with the same expiration date.
Vertical Spreads are directional strategies and are either bullish or bearish. This is what the generic expiration graphs look like.
The Bull Vertical can be constructed with either Puts or Calls. When it’s...
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