Vertical Spread

An options trading strategy with which a trader makes a simultaneous purchase and sale of two options of the same type that have the same expiration dates but different strike prices.

Investopedia Says:
Profits are determined by the widening or narrowing of the difference between the option premiums on the two positions.

Related Links:
An introduction to the world of options, covering everything from primary concepts to how options work and why you might use them. Options Basics Tutorial
This trading strategy is an excellent limited-risk strategy that can be used with equity as well as commodity and futures options. Vertical Bull and Bear Credit Spreads
Learn why option spreads offer trading opportunities with limited risk and greater versatility. Option Spread Strategies

Option strategy that involves purchasing an option at one Strike Price while simultaneously selling another option of the same class at the next higher or lower strike price. Both options have the same expiration date. For example, a vertical spread is created by buying an XYZ May 30 call and selling an XYZ May 40 call. The investor who buys a vertical spread hopes to profit as the difference between the option premium on the two option positions widens or narrows. Also called a Price Spread. See also Option Premium.