Options & derivatives
Options spread
An options spread combines buying and selling several options to bound the risk and reward of a strategy.
An options spread combines buying and selling several options to bound the risk and reward of a strategy.
By buying one option and selling another, you reduce the cost and cap both the loss and the gain. Spreads let you bet on a direction in a more measured way than buying a single option.
You buy a $50 call and sell a $55 call: your cost drops, but your gain is capped at $5.
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