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What is to spread an option?

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Anonymous

12y ago
Updated: 8/19/2019

To spread an option, or to create an option spread, is to put on a corresponding short position onto your existing long position (or vice versa), in order to create options spreads with specific payoff profiles.

For instance, if you bought a call option, it would have limited downside risk with unlimited profit potential. But if you sold an out of the money call option on top of that call option, you would create a call spread which lowers capital outlay but also limited upside profit potential.

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Wiki User

12y ago

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