Chapter 10. Vertical Spreads
The most basic option trade is to buy a call or a put depending on which way you think the underlying stock is going to move. The next stage of options trading is the use of spreads. In the simplest spread trade, you buy one option and sell another in order to reduce the cost of the trade. There are a variety of spread trades, which are discussed in this book. The focus of this chapter is on vertical spread trades. Of all the spread trades, these are perhaps the easiest to implement and to follow.
What does a vertical spread offer beyond just buying a call or a put? The simple answer is that a vertical spread may offer an improved opportunity for profit with reduced risk.
A vertical spread can be one of two basic ...