What is vertical spread?

Vertical Spreads are just about any type of investment strategy that includes current sale and purchase with specific common features. In general, both transactions include stock options that are the same class and expiration date. However, the option and purchased option do not have to bear the same price.

Vertical spread may include any options that have the same type. This means that the option strategy can be based on activities including two banquets or two calls. For example, an investor may decide to purchase a $ 100 call in the US in the United States while selling a call for $ 110 (USD). If the option strategy includes the purchase and sale of shares of the same class and with the same expiration date, the overall transaction can be properly described as vertical dissemination.

The obvious advantage of vertical dissemination is that the investor can make money from the process. If put or call is sold at a unit per unit that is higher than purchasedPut or calls will be immediate return. At the same time, it does not have to focus on profit, but unloading the possibility of shares that shows hints of slowing and at the same time gains a similar action that is assumed that it will increase in the short term. Although it originally did not generate a profit for the investor, this approach will increase the value of the portfolio, provided that the shares acquired are according to the projections.

Vertical spread can take place in a number of market settings. The span can be used in bulls and bear markets. Over the years, a number of different types of vertical spread strategies have been developed that operate in a given set of conditions on the market, such as the vertical span of bulls and carrying, front range and rear propagation.