Options spreads and straddles


If a spread is designed to profit from a rise in the price of the underlying security, it is a bull spread. From Wikipedia, the free encyclopedia. By using this site, you agree to the Terms options spreads and straddles Use and Privacy Policy. A bear spread is a spread where favorable outcome is options spreads and straddles when the price of the underlying security goes down. Many options strategies are built around spreads and combinations of spreads.

The resulting portfolio is delta neutral. The three main classes of spreads are the horizontal spread, the vertical spread and the diagonal spread. If a spread is designed to profit from a rise in the price of the underlying security, it is a bull spread. Articles needing additional references from April All articles needing additional references Articles with Curlie links. For example, a bull put spread options spreads and straddles basically a bull spread that is also a credit spread while the iron butterfly can be options spreads and straddles down into a combination of a bull put spread and a bear call spread.

Vertical spreadsor money spreads, are spreads involving options of the same underlying security, same expiration month, but at different strike prices. Options finance Derivatives finance. Options spreads and straddles page was last edited on 31 Augustat By using this site, you agree to the Terms of Use and Privacy Policy.

Options finance Derivatives finance. The calls and puts have the same expiration date. Views Read Edit View history.

In practice, it can be considered the implied volatility of the option spread. Unsourced material may be challenged and removed. Articles needing additional references from April All articles needing additional references Articles options spreads and straddles Curlie links. The three main classes of spreads are the horizontal spread, the vertical spread and the diagonal spread.

For this reason, a box is sometimes considered a "pure interest rate play" because buying one basically options spreads and straddles lending some money to the counterparty until exercise. Unsourced material may be challenged and removed. In practice, it can be considered the implied volatility of the option spread.

A box spread consists of a bull call spread and a bear put spread. The net volatility of an option spread trade is the volatility level such that the theoretical value of the spread trade is equal to the spread's market price. A bear spread is a spread where favorable outcome is obtained when the price of the underlying security goes down. When more options are purchased than written, it is a backspread. A box spread position has a constant payoff at exercise equal to the difference in strike values.