Option spread definition

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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Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 74% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.