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In finance, a debit spread, a.k.a. net debit spread, results when an investor simultaneously buys an option with a higher premium and sells an option with a lower premium. . The investor is said to be a net buyer and expects the premiums of the two options (the options spread) to wid
The Bear Call Credit Spread (see bear spread) is a bearish strategy and consists of selling a call option and purchasing a call option for the same stock or index at differing strike prices for the same expiration. The purchased call option is entered at a strike price higher than the strike price of the sold call option.
In mathematical finance, Margrabe's formula [1] is an option pricing formula applicable to an option to exchange one risky asset for another risky asset at maturity. It was derived by William Margrabe (PhD Chicago) in 1978. Margrabe's paper has been cited by over 2000 subsequent articles.
Options spreads are the basic building blocks of many options trading strategies. [6] A spread position is entered by buying and selling options of the same class on the same underlying security but with different strike prices or expiration dates. An option spread shouldn't be confused with a spread option.
If the bull call spread is done so that both the sold and bought calls expire on the same day, it is a vertical debit call spread. Break even point= Lower strike price+ Net premium paid This strategy is also called a call debit spread because it causes the trader to incur a debit (spend money) up front to enter the position.
The option strategy where the middle options (the body) have different strike prices is known as a Condor. A Christmas tree butterfly (not to be confused with the unrelated option combination also called a Christmas tree ) consists of six options used to create a payoff diagram similar to a butterfly but slightly bearish or bullish instead of ...
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