CFDs are a leveraged product and can result in losses that exceed deposits. Trading CFDs may not be suitable for everyone, so please ensure you fully understand the risks and take care to manage your exposure.

Option spread definition

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An option spread is a strategy used in options trading. It involves buying and selling multiple options on the same underlying asset that are almost identical to each other but with a different strike price or expiry.

There are three main types of options spread used by traders:

  • Vertical spreads have identical expiry dates but different strike prices
  • Horizontal spreads have identical strike prices but different expiry dates
  • Diagonal spreads have different expiry dates and strike prices

Traditional options spread strategies involve buying and selling equal numbers of options contracts. When this isn’t the case, it is called a ratio spread or a backspread.

Different option spread strategies have different uses for an options trader. 

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CFDs are a leveraged product and can result in losses that exceed deposits. Trading CFDs may not be suitable for everyone, so please ensure you fully understand the risks and take care to manage your exposure.