vertical spread

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Vertical spread

Simultaneous purchase and sale of two options that differ only in their exercise price. See: Horizontal spread.

Strike Spread

In options, an investment strategy involving the sale of one option and the purchase of another option identical to the first in every way except the strike price. For example, an investor may write a call giving the buyer the right to buy 1,000 barrels of oil with a strike price of $50 per barrel, and, at the same time, buy a call giving himself/herself the right to buy the same amount of oil at $40 per barrel. In the event that both options are exercised, the investor profits on the difference in the strikes. A strike spread is also called a money spread, a vertical spread, or a price spread.

vertical spread