Perpendicular Spread

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Perpendicular spread

Option strategy involving the purchase of options with similar expiration dates and different exercise prices.

An option strategy in which one buys options of the same class on the same underlying asset with the same expiration date, but with different strike prices. On or before the expiration date, the option holder exercises the option at the strike price that is most advantageous at the time. This protects the option holder from the risk of having an out-of-the-money option: the more options one has, the more likely it is that at least one will be in-the-money.

perpendicular spread

A combination of options with the same expiration date but different strike prices.

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