Credit Spread (redirected from Credit-spread)

Credit spread

Applies to derivative products. Difference in the value of two options, when the value of the one sold exceeds the value of the one bought. One sells a "credit spread." Antithesis of a debit spread Related: Quality spread.

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credit spread

The simultaneous sale of one option and purchase of another option that results in a credit to the investor's account. Thus, more funds are received from the sale than are required for the purchase. Compare debit spread.

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Credit Spread

What Does Credit Spread Mean?

(1) The spread between Treasury securities and non-Treasury securities that are identical in all respects except for the quality rating.

(2) An options strategy in which a high-premium option is sold and a low-premium option is bought on the same underlying security.

Investopedia explains Credit Spread

(1) For instance, the yields on Treasuries are lower than the yields on single A-rated industrial bonds because the Treasuries are backed by the full-faith and credit of the government and are rated higher; the Industrial bond is not. (2) An option credit spread example would be buying a Jan 50 call on ABC for $2 and writing a Jan 45 call on ABC for $5. The net amount received (credit) is $3. The investor will profit if the spread narrows. This also can be called a credit spread option or credit risk option.

Related Terms:
• Bond
• Premium
• Treasury Bond—T-Bill
• Yield
• Yield Curve