Selling the Spread

Selling the spread

A spread whose option to be sold is trading at a higher premium than the option to be bought.

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Sell a Spread

In options, to write a contract for a higher premium than a contract with the same underlying asset that one buys. For example, one my write a put option with a certain underlying after buying a similar put option with the same underlying, though often with a shorter expiration date. One sells a spread to hedge investments: in this case, if either option is exercised, the investor has still made a profit by selling the contract at a higher premium that the one he/she paid for buying the other contract.

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Sell the Spread

In an option spread, to sell an option contract at a higher price than one pays to buy another option in the same spread.